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Fintech expected to pull in big bucks even as stock market collapses
The stock market may be in a sad, dark place right now, but fintech is riding high.
In the week ending August 20, 25 fintech companies raised $1.63 billion, reports Finovate. Lending company Sofi was the biggest winner, bringing in a whopping $1 billion and edging toward a $4 billion valuation. Avant and Dianrong were runners up, raising $340 million and $220 million respectively. And fintech doesn't want to slow down any time soon.
"Fintech is such a big market, and it's still so early in terms of some of these companies gaining traction, there's still room to grow," says Matthew Wong, research and data analytics at venture capital database CB Insights. Startups in general don't seem to be slowing down, and fintech is one of the hottest areas right now. Lending companies like Sofi, payments, and personal wealth management are all popular, says Wong. And investors especially love technology that appeals to millennials, such as easy apps. Funding is expected to continue to be strong for the rest of the year. Andreessen Horowitz's recent hire of a young, startup-founding partner is a prime example of where venture capitalists are looking in the future.
Mobile payment provider Square moving to IPO will be a good lightening rod for the industry, and one that everyone will be watching, says Wong. If the IPO isn't well received, it may show that valuations for fintech are too high.
Fintech firms are taking on the big banks and each other, but there's limited direct competition that is seen in other industries. Fintech firms typically carve out a niche, focusing on wealth management for instance, and not trying to be a giant bank. And the banks aren't stupid. Goldman Sachs has jumped fully into investing in fintech, particularly data driven companies like Motif Investing. Other banks, including JPMorgan, are close behind, looking at fintech opportunities to enhance their own businesses and show them what competition is coming. "We are seeing more banks invest now in these companies and trying to see what this technology is looking like," says Wong.
Photo: Joe Ross