Global fintech market: Growth drivers, challenges and key trends

Global Fintech market

The global appetite for fintech is growing at a lightning pace. Witnessing a substantial expansion in 2018 the global fintech market is expected to continue this momentum in the coming years. According to Netscribes, the market is expected to be valued at USD 305 billion by 2023. Here are some of the growth drivers, challenges, and key trends in the global fintech domain.

Growth drivers

Growth in mobile usage
Increasing use of mobile devices and technology-based solutions are accelerating the demand for financial and banking solutions, accessible through personal devices. Banks and financial firms are investing heavily in priming their technology stack to cater to such evolving needs.

Increasing investments in regtech
Global institutions are expected to comply with regulatory norms across jurisdictions. Staggering compliance expenses have compelled many companies to invest in regtech firms to keep unseen legal implications at bay. The advent of financial regulations including Payment Services Directive 2 (PSD2), General Data Protection Regulation (GDPR), and Markets in Financial Instruments Directive II/Markets in Financial Instruments Regulation (MiFID II/MIFIR) have accelerated these investments in the last six months.

Booming e-commerce industries
E-commerce adoption has propelled the use of various digital payment and e-wallets, globally. Companies, as well as individuals, are trusting fintech firms with their data for fund transfer, online purchases, and e-wallet usage.

Challenges facing the global fintech market

The advent of GDPR
The introduction of GDPR has impacted various sectors – from market research firms to fintech companies especially in the UK. According to the EU commission, the GDPR intends to reinstate the citizen’s control over their personal data and to simplify the regulatory environment for business. This has been pushing both new and old financial service companies to invest substantial time and resources to certify that they comply with these new laws. Yet, there are several firms that find GDPR a challenge, as it affects many departments and people with severe penalties incurred if they fail to meet the standards. 

Averting cyber-attacks
As the number of cybercrimes soar and become more sophisticated in nature, fending these attacks has become a paramount challenge for firms and governments worldwide. For financial firms that deal with sensitive client information, this could be particularly risky.

The need for human touch
This is one of the leading reasons why fintech firms lag behind when compared to traditional financial companies. Being absolutely online in their transactions and support often leaves clients feeling like they are dealing with a faceless entity.

Prioritizing AI and blockchain
AI and Blockchain are expected to be the top priorities for fintech investors, followed by insurtech and regtech, during the forecast from 2018 to 2023. 

Higher usage of digitization
Factors such as rise in competition among new entrants and growing global consensus on reducing remittance transaction fees are driving the penetration of digital channels.

Progress of the remittance market
Fintech companies in the remittance segment have been experiencing remarkable growth since the past few years. Due to increasing awareness about online money transfer, remittance through fintech solutions has improved considerably.

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