A couple of years ago, ‘fintech’ was reserved for banks and other lending institutions. Today, fintech affects everyone’s life, from e-commerce, online lending, and mobile wallets. While fintech is a relatively young industry, it has snowballed. Fintech’s funding in the third quarter of 2019 exceeded the total from 2017 funding. However, the Covid-19 pandemic adversely affected the economy.
The pace of funding for fintech companies has slowed down, reported at $6B for the first quarter in 2020, similar to the 2017 level.
Here are the five fintech trends for 2020:
Alternative lending involves traditional institutional borrowers seeking investments from online platforms. It is a form of peer to peer lending.
In the US, alternative lending not only attracts SME stakeholders but students. Alternative lending is helping students with their student loan problems. For students, alternative lending and income-sharing agreements (ISA) are better than traditional student loans. Investors can purchase penny stocks in small alternative lending companies as the sector is on a growth trajectory.
Alternative lending reduced in 2019 compared to the third quarter of 2018 due to strict regulation in Asia. There is a chance that alternative lending will pick up once the Covid-19 pandemic is over.
Digital Mortgages and Real Estate Ownership
Digital mortgages allow people to own homes through two models: rent-to-own and cash guarantee. Under the rent-to-own option, the person eventually buys a house without paying a mortgage through an agreement to buy the house within a certain period. The fintech company buys the house, and the client agrees to a rent-to-own agreement.
Alternative payment flows
The alternative payment trend was sparked by the US Federal Reserve announcement on the need for a real-time payment service. The banking and payment system remains slow, yet technological advances can allow for a real-time payment system. The US Federal Reserve intends to introduce a real-time payment system by 2024. Fintech companies can focus on alternative payment infrastructure to get ahead of this trend. For example, Rapyd is a UK-based business offering rapid payments for fund collection, checkouts, foreign exchange, and other services.
The cryptocurrency market has some benefits and risks. Cryptocurrency investment is associated with many risks, such as rates, instability, and unclear regulatory treatment. The risks associated with cryptocurrency are reasons why traditional financial institutions do not accept cryptocurrency. The emerging trend is a cryptocurrency that is stable as the dollar or gold.
Capital market digitalization
Capital market digitalization is not a new trend as it has established its niche market. Online platforms such as ClearMinds have expanded their services to digital mortgages. The $27 billion takeovers of the London Stock Exchange by Refinitiv was a long-term strategy to digitize the stock market. The deal was a sign of further collaboration between fintech and capital markets.
Covid-19 has strongly affected the fintech industry. The economic slowdown reduced the sector’s growth, but there are opportunities for certain fintech services. Fintech players must be willing to expand their services to take advantage of new trends such as alternative lending and digital mortgages to attract more customers.