2018 was a polarized year for fintech trends, with small- and mid-cap companies expanding their businesses.
Fintech had a polarized year in 2018, with several small- and mid-cap companies expanding their businesses while banking firms and venture capitalists played the waiting game — at least in Canada — due to the impending Bank Act.
KPMG’s review of the first two quarters of the year states that global investment in fintech hit US$57.9 billion across 875 deals, which exceeded total annual investment in the space in 2017.
On that note, here the Investing News Network (INN) takes a look back at the biggest fintech trends of the year with comments from industry experts.
Fintech trends 2018: Companies expand businesses
Some of 2018’s major fintech news stories centered on business expansions for companies worldwide.
For example, in December, MoneyGram (NASDAQ:MGI) launched its new mobile app in the US and 14 other countries. The app includes several features, including biometric identification, a location finder and transfer tracking. The company said that more than 70 percent of its online transactions are made on mobile devices.
“2018 has been an incredible year of growth for our digital platforms,” said CEO Alex Holmes.
In November, the company announced the expansion of its digital domains to seven new countries, bringing its total presence to 24 countries.
“These actions support our commitment to offer our customers a true omni-channel experience when they transact with us,” Holmes commented.
In Canada, several companies have been expanding their businesses by adding new markets to their platforms or adding new clients to their existing customer bases.
It is also worth noting that Canadian Prime Minister Justin Trudeau placed the Canadian fintech space in the spotlight during his visit to Singapore in November.
In August, Vancouver-based Mogo Finance Technology (TSX:MOGO) announced the expansion of its services to five new provinces, opening up its product portfolio to over 20 million Canadians.
The company, which offers six financial products that range from a credit monitoring solution to its Mogo Card, also revealed it had surpassed 700,000 members.
Another company that has been expanding its business is Mobi724 Global Solutions (TSXV:MOS). However, CEO Marcel Vienneau believes investors’ lack of interest in small-cap companies has had an effect on the industry.
“Small-cap fintech companies were not in the focus of attention of [the] investor community in 2018,” Vienneau said in a email statement to INN. “This trend impacted the entire industry. We believe that investors do not see its true value in the country.”
“We were expecting to reduce our sales cycle from some 20 months to less than one year and we planned to go live in two countries,” Vienneau said. “We are now signing new deals within less than 12 months, and we should be able to be live in five or six countries before the end of year.”
Further, Vienneau said that the company is in the process of launching with clients in Latin America, and noted that its relationship with Visa (NYSE:V) for the Latin America and Caribbean region has been “developing well.”
Fintech trends 2018: “Record year” for sector
Multiple reports have suggested that fintech had a “record year” in 2018. As mentioned, KPMG’s latest report on the sector from July states that global investment had already exceeded last year’s total.
KPMG said that global investment in fintech companies reached US$57.9 billion across 875 deals in the first half of the year. The firm also suggested that the market was expected to remain strong for the remainder of 2018, while also indicating that leading players in the “payments” vertical would continue to focus their efforts on product expansion.
Further, the firm said that Canadian deal value, which dropped from the second half of 2017, remained strong in terms of deal volume.
“A number of the larger financial institutions in Canada have recognized the need to invest in fintech and have made significant inroads in terms of both making investments and in developing partnerships to help move innovation forward,” the report states.
One of the larger financial institutions is the Royal Bank of Canada (TSX:RY), which in June chose to put more focus on its digital platform at the cost of physical bank space.
“We are seeing more and more clients chose to interact through digital,” Neil McLaughlin, group head of personal and commercial banking at RBC, said at an investor conference at the time. “We are seeing mobile become our number one channel (in digital space). From a cost perspective, this is a positive trend for us. We are quite excited about it.”
KPMG also noted that the Canadian government is in the midst of updating the Bank Act, which is set to be formalized in 2019. The firm believes that venture capitalists and fintech companies will be putting more efforts into the space when the policy is updated.
Meanwhile, Fintech Global says that global investment reached US$54.4 billion across 1,188 deals in the first three quarters of 2018, with the sector showing its largest growth since 2014.
The firm also suggests that funding for the sector has seen an increase of 66.9 percent from last year’s total. Crucially, North American companies have dominated global deal activity, with 42 percent of total value invested in companies based in North America.
Fintech trends 2018: Investor takeaway
Fintech has certainly evolved, as is evident from the large value of deals and more institutions putting their focus on the sector.
With several small- and mid-cap companies expanding their businesses in 2018, and with larger companies moving into the vertical, it’s an exciting time for investors to be in this space.
Click here for our fintech outlook for 2019 and learn what’s in store for the industry’s future.
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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.