Despite the ebbs and flow, fintech is a great area to invest in if you are capable of sustaining a loss as well as reaping profits.
Cryptocurrency peaked in 2021 and since then investors around the world have lost $2 trillion in crypto. The price of Bitcoin has fallen by $50,000 since it hit its peak at $68,000. These figures go on to show that investing in technology comes with inherent risks as well as outrageous rewards. The fintech industry is predicted to grow at an incredible CAGR of 19.8% between 2022 and 2028 to reach a total worth of $332.5 billion. It is a great area to invest in and it is one of the areas where you can sustain grave losses. We’ll discuss both sides of the coin in this post.
3 Reasons to Invest in Fintech in 2023
2022 has not been a poster-worthy year for the fintech industry. There have been losses and heartbreak. People have lost a lot of money and some have made a lot of money. We will discuss those things later. Despite the pitfalls, 2023 is a good year to invest in fintech for some specific reasons.
1. More focus on security
Security has been a recurrent issue for the fintech sector. The industry is built upon the principle of speed and accessibility and security often takes the backseat when companies are evolving and developing fast. Thankfully, cybersecurity in the fintech industry is one of the key driving factors at present and investors can expect some strong positive steps in terms of security from fintech companies.
2. Better infrastructure
As the fintech industry inches closer to global maturity, better infrastructure is something we can expect. Fintech companies are striving for increased stability and a lot of money is being poured into infrastructure and security. It will somewhat alleviate the risk of investing in fintech.
3. The dependency on fintech
From students looking for easy loans to startups looking for an investment bank, everyone is growing dependent on fintech companies. At this point, traditional banking cannot offer the speed of service and flexibility of transactions that fintech companies bring to the table. From that angle, fintech can only grow from here provided it smoothens in some rough edges.
3 Resounding Risks of Investing in Fintech
Yes, the risk prevails. There is risk involved in any form of technology and fintech is no exception.
1. Dependency on Disruptive Tech
Fintech is driven forward by machine learning-powered algorithms. These algorithms depend on data and the patterns in data. Hence, the algorithms can react unpredictably in an unfamiliar situation. In fact, it can be biased and that is not good for business.
2. Technical failure
Technology may fail, and it may work differently in different locations based on various overhead factors. All can come together to make it unavailable or inaccessible for users. An hour of such lack of access can result in hefty financial losses.
3. Security risks
While we have mentioned security as one of the factors that are supposed to drive fintech forward in 2023, it still remains one of the major threat factors. Fintech deals with vital personal information and security breaches can be catastrophic. This becomes a serious concern as fintech companies are not as tightly bound by regulations as traditional investment banks.
Investment cannot be devoid of risk. While there are serious risks in investing in fintech, the risk is getting alleviated every day and the profitability is quite undeniable.