It’s been roughly a decade since fintech has taken off as the innovation sector that we know today. The fledging startups garnered skeptical interest at best by the long-established players with much to prove. But 2019 and 2020 seems to have seen the market mature and may indicate it will become an important part of the finance industry.
2019 saw a huge shift towards more prudent startup investment, especially in fintech. Investment in early-stage fintech startups dropped off drastically but investment in growth-stage companies increased. Almost half of all investments made in 2019 were mega-rounds, $100 million or more, which all went to later-stage companies.
The shift from early-stage high-risk fast-growth companies to more developed and profitable companies shows people now view the market as more of a long term investment as opposed to a high-risk, high-reward gamble. 2020’s acquisitions of Plaid by Visa and Radius Bank by LendingClub add to the legitimacy of the market as a whole.
LendingClub is one of the oldest and biggest fintech companies and also the first to buy a traditional bank. By doing so, LendingClub will be able to offer traditional banking products like checking accounts. They will also be able to save $40 million dollars in banking fees a year.
Both LendingClub and Plaid are proving that fintech’s innovations fill a need and far from a gamble, partnerships and investments might even be vital to stay competitive. Plaid’s acquisition brings to light potential future partners or buyers of the 66 fintech unicorns that have a combined value of over $250 billion dollars.
The maturity of the market will soon greatly accelerate the financial industry as we’ll likely see more partnerships between fintech companies and the legacy players.