FinTech: the Finance trend of 2020

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In recent years, the use of FinTech in the financial sector has steadily increased. Recently an article has been posted about the implementations of FinTech within Adyen. But what is FinTech exactly and how has this trend evolved?

What is FinTech?

FinTech originated from two concepts: ‘financial’ and ‘technology’. The concept FinTech is, however, rather broad; it includes all innovative financial products or services that contribute to automating and improving the current financial market. Although the initial focus of FinTech companies was mainly on improving the internal processes of financial institutions, we have seen a shift towards the consumer market in recent years. More and more FinTech companies are focusing on the financial transactions, investment services, and credit applications of consumers. FinTech makes it possible to use these financial services without the direct assistance of a person: the algorithms in the application will eventually be the deciding factor. FinTech’s ultimate goal is to reduce costs, optimize processes, and broaden the market.

“The FinTech market has experienced tremendous growth after the outbreak of COVID-19.”

History & market growth

Since 1993, when Citicorp initiated a new project called ‘Financial Services Technology Consortium’, the FinTech market started to grow. Four years later, the first mobile transaction was established via a text message. After 1998, the year of the foundation of PayPal, the growth of FinTech increased rapidly. Partly due to the introduction of Apple Pay in 2014, the consumer demand for FinTech related services increased even further. This made FinTech an indispensable part of today’s global financial system.

Currently, the 3 largest players on the FinTech market are PayPal (US$240 billion), Ant Financial (US$150 billion), and Adyen ($US43 billion). The market value of the FinTech industry had a value of approximately US$1200 billion in 2019 [1]. This is equal to approximately 4% of the value of the total financial industry worldwide. The largest part of the FinTech market consists of companies that focus on digital payments (US$1080 billion). The rest of the market consists of companies involved in Artificial Intelligence or Blockchain (US$120 billion). The FinTech market has experienced tremendous growth after the outbreak of COVID-19. The increased demand for online shopping has led to an increase in transaction volumes [2]. This increase is also reflected in the share price of PayPal and Adyen, with an increase of +76% and +89% respectively since March 1, 2020. In addition, Ant Financial has announced that it will go public this year, with the potential to realize the largest IPO of 2020 [3]

Trends within the FinTech market

The current FinTech market largely consists of start-ups. At the time of writing, there are approximately 12,000 start-ups worldwide in the field of FinTech. About 380 of these are start-ups with a value of more than US$ 1 billion, a so-called ‘unicorn’ start-up. A large part of these start-ups has made use of Venture Capital (VC) financing in recent years. A VC company takes an ownership interest of a start-up, where a large growth of the start-up is necessary to recoup the investment. In 2019, the total VC amount was US$273 billion, a huge amount. These figures show that a lot of growth is expected in the FinTech market by VC companies.

The growing FinTech market has a major impact on today’s banks. We, therefore, see a large growth in the number of collaborations and acquisitions of banks and FinTech companies. We also see a shift towards the type of investments that banks make. Banks are currently focusing on larger FinTech firms, on a smaller scale, even though we saw huge investments in smaller FinTech start-ups in the early phase of the FinTech market. Many of these small investments turned out not to add value [4]. Therefore, banks are looking for partnerships with FinTech companies that can optimize the current services with a high chance of success, which leads them to FinTech firms that are more developed

In addition to the banks, Big Tech companies such as Apple, Google, and Facebook also influence the current FinTech market. Big Tech firms mainly focus on the growth of their own payment platform. Currently, the market share of Apple Pay, Google Pay, and Samsung Pay is 56% of the total mobile payments market [5]. In the upcoming years, the mobile payments market is expected to grow along with the overall FinTech market. The user-friendliness and speed of mobile payments will further increase the acceptance of the current generation.  

Artificial Intelligence (AI) also plays an important role in the FinTech market. You can think of simple automation, but also of complex machine learning. It is often used in the financial sector to perform simple tasks that would usually be done by an employee. AI has the potential to reduce costs and increase a company’s productivity. Currently, Robotic Process Automation (RPA) is a development that has a major impact on financial institutions. Not only the signing up of new customers, but also the verification, risk analysis, and security checks of these fresh clients can be performed by an RPA system. An RPA system automatically adheres to the legislation at that time. RPA systems can ensure higher efficiency and effectiveness within the organization [6]. In addition to the aforementioned services, financial institutions increasingly use Blockchain technology. These financial institutions use Blockchain for smart contracts, digital payments, identity management, and stock trading. The technology can be described as a chain of ‘blocks’ containing data. The data from previous ‘blocks’ remains unchanged, making operations secure and transparent to the user. According to PwC, 77% of financial organizations will have integrated blockchain by 2020. In addition, according to PwC, 90% of payment companies will use Blockchain to secure payments this year [7]. The Blockchain market, therefore, has a major impact on growth within the FinTech market.


The rapid development of the FinTech market brings many opportunities as well as challenges. A large amount of collected data about customers by FinTech companies can cause problems. The created ‘digital footprint’ of the consumer is used in marketing, sales, and financial decisions. To reduce the risk of data loss by hackers, FinTech companies have to invest more in Cybersecurity. It will be a challenge for FinTech companies to keep up with the growth in Cybersecurity [8].

In addition, the tightened regulatory and reporting requirements require a lot from financial institutions. An example where things recently went wrong is Wirecard, where €1.9 billion in assets were declared fictitious. Due to a lack of regulation, Wirecard was able to create payments that did not actually take place [9]. One development that should optimize the regulation within FinTech companies is RegTech. RegTech companies specialize in setting up digital compliance systems based on Artificial Intelligence [10]. A development that becomes crucial with the increasing use of digital processes by FinTech companies.

Future expectations

In the upcoming years, the FinTech market is expected to grow further. The Venture Capital investments show that this expected growth will be significant. In addition, we will most likely see an increasing number of collaborations between large FinTech companies and banks. Emerging trends such as Artificial Intelligence, RPA, and Blockchain will become very important in the coming years to optimize FinTech firms. There are a number of challenges lurking here: FinTech companies will have to make maximum efforts in the field of Cybersecurity and RegTech to prevent problems. All in all, the FinTech market has a lot of potential that will make daily life easier for individuals and companies.