In the UK, the first half of 2021 saw £4.1 billion invested into the FinTech sector, 34% more than all of 2020. The question is: why?
First Off, What Is FinTech?
Before we start talking about what’s making FinTech so successful, we have to define the term. FinTech, or Financial Technology, refers to technology – usually software and overwhelmingly internet-based – that assists with all sectors of the finance world. To illustrate what’s covered by the blanket of “FinTech”, we’ve prepared this diagram that lays it all (or, at least, the vast majority) out.
Ever since the industrial revolution, the rate at which technology has been improving and developing has been staggering. Once the internet was invented, it only picked up more speed. It wasn’t long before this catalyst hit the oldest and most enduring industry there is: finance. This electric mixture of old and new allowed FinTech to become the most impactful development in recent history.
Stirring the Stubborn
Being as old and consistent as they are, banks and other financial institutions are famously stuck in their ways. Like any large, old, heavy object, it takes a lot of force to change the momentum of giants like these. The very fact that FinTech startups are disruptive enough to be accepted by financial institutions shows that they have massive potential behind them.
Due to their disruptive nature and their versatility within the financial sphere, FinTech leads the startup space by a country mile, producing far more unicorns than any other sector. This only increases trust in the industry, propelling it forward via a positive feedback loop.
The Long Arm of the Wallet
It’s easy to forget how wide-reaching the realm of finance is. Every individual and business under the Sun has finances of some kind. Almost everyone has a bank account, and needs to make and spend money while keeping track of how much they still have.
One way of representing this is to think of Science and Maths. There are many scientific disciplines, but each one requires at least a bit of Mathemetics: it might be calculating the trajectory of a projectile in Physics, measuring chemical compositions in Chemistry or administering the right dosage in Medicine. It stands to reason that a tool that can help with Maths would be indespensable to any scientist, regardless of speciality.
Financial Services as an industry is fairly closed off to the layman. We rarely understand what goes on in the banks and on Wall Street unless we have a vested interest. The fingers of FinTech, however, reach out from those shadows and into our own pies – our phones, our bank accounts, even our homes. Developments in this sector, therefore, are developments for all of us, explaining their impact and explosiveness.