Is the Global Fintech Sector Becoming Overcrowded?
Fintech companies have made a big impact on the financial scene over the last decade. As the demand has increased for more convenient, personalised, and accessible financial solutions, we’ve seen more and more Fintech startups enter the scene. However, with thousands of Fintech companies around the world scrambling for customers, are we now at a stage where the Fintech space is becoming overcrowded?
Is the Fintech Market Saturated?
Although the Fintech market is still relatively new (it’s only just over ten years old), it does seem to appear that the sector has reached a peak interest. Innovative and revolutionary services such as robo advisors, budgeting tools and instant payment solutions had consumers flocking in their droves just a few years ago. However, as Fintech businesses have acquired larger customer bases, innovation has naturally slowed down, and the market has become harder to compete in.
A Challenging Environment for New Fintechs
With many Fintech businesses already offering similar platforms and services, new Fintech businesses are finding it increasingly more difficult to stand out. Combine this with the fact that small-scale startups have smaller budgets and more limited resources compared to the more mature fintech firms, and it doesn’t bode well for their future.
Over the last few years, dozens of firms have failed in their pursuit of cashing in on the fintech trend. A money management app called Loot which raised over £5 million in funding went into administration in May 2019. Similarly, another Fintech business set up by Natwest called Bo was scrapped in May of this year.
Countless businesses have struggled to compete in this space, and as time goes on, we can expect to see more Fintech startups throwing in the towel.
It’s Only Going to Get Tougher for Fintechs
The big banks are finally awake to the power of digital solutions and with the vast resources they have available to them, it’s only a matter of time before the banks begin to catch up.
It’s also likely that Fintech firms will have to start competing against some of the tech giants. Companies such as Facebook and Google are now starting to eye the financial services sphere, with Facebook set to launch a digital currency called Diem, while Google is exploring offering checking accounts to consumers.
With financial institutions and tech giants set to enter the Fintech scene, it’s going to become harder than ever for Fintech startups to succeed.
It’s Not All Doom and Gloom
Yet, despite all the competition, there is still a massive amount of money funneling into the industry. Global Fintech investment has gone from $4.05 billion in 2013 to $137.5 billion in 2019, and this level of funding looks set to increase over the years. Investors wouldn’t be so keen if there weren’t growth potential.
A vast amount of people can benefit tremendously from Fintech solutions, particularly among the billions of unbanked and underbanked people around the world. As long as there is sufficient demand to be met, there will continue to be room for new Fintech companies and solutions.