Global investment in Fintech to fall by 52% in 2022 despite continued VC funding
With digital migration, financial technology, or fintech, is slowly becoming the new norm in the financial sector. Fintech has been a disruptor since its inception just over a decade ago.
Fintech startups have changed the way banks make payments and investments. They have made it easier for people to access financial services and have given rise to new business models such as peer-to-peer lending and robo-advice.
Despite the potential, an analysis by BanklessTimes.com reveals that global investment in Fintech has fallen by 52% in 2022 despite continuous VC funding.
Speaking about the data, BanklessTimes CEO Jonathan Merry said:
Fintech investments are shifting to the crypto market
The value of fintech investments has been on a rollercoaster ride since 2019 when it reached $215.1 billion. In 2020, investment values fell by a third to $127.7 billion. However, in 2021 it rose again to $226.5 billion, but is currently at $107.8 billion in 2022.
One of the main reasons for the decline in investment value may be the shift in focus from traditional fintech to crypto and decentralized finance (DeFi).
In the first quarter of 2022, crypto startups raised $7.0 billion, more than any other type of Fintech. Thus, funding for crypto and Defi projects has increased 2.4 times since Q1 2021.
Although early-stage fintech valuations continue to rise, late-stage prices have leveled off. Nevertheless, the valuation of cryptocurrencies is rising across the board.
Crypto exchanges, DeFi, BaaS and embedded finance saw significant funding growth in the 1st quarter. This placed them among the fastest growing markets. Challenger banks also continued to garner a significant share of fintech funding.
Fintech is disrupting the status quo in emerging markets
In countries like India, Kenya and Nigeria, fintech startups are providing much-needed financial services to the unbanked population. These startups challenge the established and are slowly but surely eating into their market share.
These countries’ governments and central banks are also paying attention to the fintech sector. They come up with regulations to control the industry and protect consumers. This makes it difficult for fintech startups to operate and raises the barrier to entry.
Shaking up the financial sector in emerging markets
Fintech innovation has decoupled value chains in positive ways. The innovation has proven useful for low-income customers and the providers who serve them.
Fintech gives customers access to service providers that use new business models to deliver products. Through Fintech, customers can, for example, gain access to loans with few requirements and less bureaucratic red tape.
Moreover, providers have more opportunities to rely on third-party fintech solutions for basic banking procedures that are highly specialized, value-added and cost-effective. Both examples show how highly scalable startups are changing the financial services landscape.
The future of fintech remains bright despite the decline in investment value. The industry is constantly developing, and there are still many untapped opportunities. The decrease in investment value may be a temporary setback. When the dust settles, we may see a boom in fintech investment.
