Fintech biz is gaining popularity among global investors

The global fintech market attracted nearly $220 billion in investment by 2022, of which technologies related to payments, cryptocurrencies, banking and asset and wealth management contributed nearly 80 percent, global management consultancy McKinsey& Company said.

There were several changes in trends in financial technology investment. The amount of money raised in a Series D funding round or later rounds accounted for nearly 65 percent of the total last year, up from about 35 percent in 2020, meaning investors paid more attention to business and revenue models than new ideas, McKinsey said in a recently published report.

While the majority of fintech investments came from Europe and North America, which contributed 72 percent of the total last year, such investments increased rapidly in emerging markets. Asia had growth of 18 percent year-on-year, higher than the growth of 5 percent in Europe and North America in the same period.

Although private equity firms remained the primary fintech investors in 2022, their investments in this field fell by 14 percent year-on-year. At the same time, technology companies’ investments in financial technology increased significantly by 63 percent year-on-year, revealing their intention to open a new front in the financial sector by making strategic investments, the report says.

McKinsey listed artificial intelligence, cloud computing, metaverse, blockchain and Web 3.0, next-generation communications, next-generation integrated development, and trust frameworks and digital identities as the seven technologies that will reshape the pattern of the financial sector in the future.

“These technologies will have a disruptive impact on financial institutions in various aspects, including marketing, product development and operational risk management. Financial institutions should continuously provide drivers for their business innovation and the development of the fintech ecosystem by building their own innovation incubators, joining hands with external agencies for to develop fintech accelerators or establish a fintech investment fund,” said John Qu, senior partner at McKinsey.

Major banks, insurance companies and securities firms have gradually turned from experimenting with fintech applications to promoting the use of such applications widely, said Han Feng, a partner at McKinsey.

“We believe that fintech applications will improve customer experience, promote product innovation and significantly improve business efficiency,” Han said.

Earlier this year, Industrial and Commercial Bank of China, the country’s largest state-owned commercial lender by assets, launched a metaverse business hall in Xiong’an New Area in Hebei province.

Using the flagship business hall of ICBC as a prototype, it can provide an immersive experience and varied interactions with clients through the integrated use of digital twin modeling, content generation and intelligent interaction technologies.

The bank plans to expand the pilot program for the establishment and operation of a metaverse business hall to its Beijing and Shanghai branches, said Jin Haimin, assistant general manager of the financial technology department at ICBC.

“We are judiciously exploring the future application scenarios of the metaverse in the banking sector, striving to seize the initiative in technological innovation and business model reform,” Jin said.

Many other banks listed in China are also promoting digital transformation and deeper integration of business and technology.

China Construction Bank Corp continued to polish its expertise in technological capabilities by building platforms using artificial intelligence, big data, blockchain, the Internet of Things, mobile networks and agile development. The large state-owned commercial lender also independently developed blockchain technology and enhanced core technology capabilities to support key applications such as trade finance and cross-border payments, the bank’s 2022 interim report said.

Bank of China, another major state-owned commercial lender, is taking digital transformation as a strategic reform to continuously improve its capabilities to serve the real economy, Liu Jin, president of the BOC, said at the Financial Street Forum 2022 annual conference in Beijing in November .

Liu advised financial institutions to deepen the application of technologies such as AI and IoT in environmental, social and governance activities to build targeted and effective evaluation models and launch new financial products, thereby better meeting the demand for green finance.