Fintech–short for financial technology–has been around for a lot longer than one might think. While the term itself is relatively new, fintech itself can be traced back as early as the 1860s.
Like Forbes suggests, many people often think fintech is a more recent development, such as a mobile app where people can pay for goods and services without even holding physical currency.
While that is largely true, the first signs of fintech emerged from the invention of print press, which allowed for the printing of paper currencies all around the world.
Fast forward to the 1950s when credit cards were introduced, then then 1960s with automated teller machines (ATMs). A couple of decades later, the 1980s became instrumental in technology advancements, and in the finance sector. This included new banking computers and data which allowed for record-keeping systems. Then the 1990s saw the emergence of the Internet and e-commerce business models.
As you can see through the above Coles notes version of the financial sector, fintech has been a growing and evolving market for over a century. With that in mind, the Investing News Network (INN) breaks down fintech (very) briefly and an overview of how investors can step into this ever-growing sector.
What is fintech?
While technology as a whole is a rapidly growing industry, fintech has arguably seen the greatest transformation of them all.
Still, more people than not remain unfamiliar with the term. By definition from Investopedia, fintech applies to ways in which people transact business. Thanks to the evolution of the Internet, the term has altered to include any form of advancement in the sector, including retail banking, investing, and cryptocurrencies such as bitcoin and blockchain.
Putting it simply, the fintech market has grown so much that it has completely changed how people use physical money. While online banking has been around for quite some time, digital-only banks are also making a name for themselves, although the options are still slim pickings. Payment apps have also surged to the forefront as examples of how the financial sector has shifted.
Established in 1998, PayPal (NASDAQ:PYPL) is one of the first digital payment and money transfer systems. The number of e-commerce payment systems has, of course, expanded since then to include hundreds of companies, including: Square (NYSE:SQ), Payline Data, BitPay and Venmo, to name a few.
The future of fintech
In 2016, $46.7 billion was invested in fintech, while Trump and Brexit were huge impacts on the fintech market the following year. As such, investments in the market dropped to $24.7 billion in 2016.
US investments alone saw a drastic fall from $27 billion in 2015 to $12.8 billion last year. The market also saw a slowdown in China, together with fluctuating exchange rates, while in Canada the fintech market was worth $137.6 million–roughly a 24 percent increase over the year. The future of the fintech market, however, is certainly shaping up to be prosperous. Over the next 3 years, fintech global investments is expected to reach $46 billion.
Of course, there are other contributing factors to the market’s rising success: Artificial intelligence (AI), for example, is shaping up to be a hot trend for the fintech market. Mark Cuban, a self-made billionaire, said that fast computer processors and larger data sets may very well push it “into a wealth of industries and services.”
NASDAQ is also getting in on the action. In April, the exchange announced its plans to make minority investments below $1 million up to $10 million through its Nasdaq Ventures programme, with a focus on blockchain, machine learning, AI, data, analytics and content aggregation.
Investing in fintech
Much like other commodities and and industries, there are a number of ways for investors to step into the fintech sector, including:
- PureFundsⓇ Solactive FinTech ETF (NASDAQ:FINQ) launched on the NASDAQ in August 2016 and includes 31 companies.
- Global X FinTech Thematic ETF (NASDAQ:FINX) launched in September 2016, but is primarily focused on US companies.
- Index: NYSE Fintech Index PR (INDEXNYSEGIS:NYOMFTX) arrived in April 2016, while the NASDAQ is aiming to set up the Nasdaq Ventures programme, mentioned above.
- Stocks: it seems as though fintech companies are popping up left, right and center, and it may seem overwhelming. Here’s a brief list for your consideration: BlackIce Enterprise Risk Management (CSE:BIS); TD Amerltrade (NYSE:AMTD); Vantiv (NYSE:VNTV); GoldMoney (TSX:XAU); and VersaPay (TSXV:VPY).
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: BlackIce is a client of the Investing News Network. This article is not paid-for content.