The phenomenal growth of the fintech industry at a global scale has turned a lot of heads over the last couple of years. 2021 was one of the best years in history in fintech investment and as we inch closer to 2023, it is important to take note of this burgeoning industry and what it can mean for you financially.
Fintech investment totaled $210 billion in 2021 according to a report by KPMG. The year also saw an unprecedented rise in crypto and blockchain markets with crypto exchanges like FTX raising billions. However, 2022 was a roller coaster ride when it comes to cryptocurrency. There was a major fallout and the prices plummeted.
Nevertheless, cryptocurrencies are here to stay thanks to non-fungible tokens (NFTs), play-to-earn, and decentralized finance – Defi. The point here is that investing in fintech will have its own risks and there are areas where you should be extremely careful, but in general the numbers should indicate the positives and you should gear up to invest in fintech ETFs.
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Customer experience is one of the areas where fintech companies have been laying a lot of focus lately and it is yielding some results in terms of spiking up interest in fintech stocks. Core banking functions are better, easier, and more user-friendly now, thanks to fintech. The buy-bow-pay-later (BNPL) industry has also shown great promise in the last couple of years. The BNPL industry is laden with risk if you think about it – it encourages overspending and it depends on positive financial behavior from the users. Things can go south very easily with both BNPL and Crypto, but they do not, and if you have deep pockets, these verticals can make you buckets full of cash.
With the fall of crypto, the rise of NFTs, the impending recession in the US, and the serious economic crises across Europe with a war raging, investors have become more and more cautious in 2022 than they were in 2021. A lot of different aspects are coming into play. The situation is such that businesses are operating under the threat that venture capital funds might get withdrawn until things are more stable.
A report by KPMG claims that there will be increased interest in cybersecurity automation in 2023, and although investments in cryptocurrencies will stay slow, they will be focused on infrastructure. Stability, security, and infrastructure are things investors will be looking for in fintech companies. VCs will be more interested in B2B and data-driven solutions.
There is definitely an enhanced amount of cautiousness as far as fintech in 2023 goes. This cautiousness is only expected with increasing interest rates and the US government trying desperately to combat inflation. At this point, it is better to be focused, knowledgeable, and aware when you make your investments in fintech.
According to a report by Forbes, the areas that are quite promising notwithstanding the general downward trends are embedded finance, alternative finance, blockchain, and environmental initiatives.