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Fintechs make use of new technologies and innovations to develop new and improved financial services for both end-users and businesses. They deal with insurance, payment, loans, asset management, personal financial management, and digital payments.
Fintech has made use of products and services at a lower cost possible for consumers. For instance, international money transfers were extremely expensive because the big banks were controlling the market. However, today, there are a number of fintech firms that allow users to exchange money directly from their mobile phone to anywhere in the world at a much lower cost. As fintech companies are small in size, they are able to innovate more quickly when starting up and have a much lower cost base so that they can transfer huge savings to the consumer.
In 2018, the Matrix FinTech Index’s market cap increased by 50 percentage points, well beyond the incumbent financial service companies and the S&P 500. Looking ahead to 2019, TechCrunch predicts that the fintechs will continue stealing the show—creating innovative tech-enabled products, providing access to underserved demographics, and putting consumers in the forefront.
The overall market cap of the top ten publicly traded U.S. fintechs increased in 2018 to nearly $170 billion, and the two-year returns of the fintechs are now 133 percentage points—100 percentage points higher than the two-year returns of the incumbents.
It is expected that all ten of the publicly traded fintechs will continue double-digit growth in 2019. Few of the incumbents expected to whimper into double-digit territory in 2019 are card issuers such as Visa of about 11 percent and Mastercard about 13 percent—partly enabled by the growth of fintech payment firms such as Square and PayPal.
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The more exciting aspect than the liquidity previously is the backlog of Stripe-led private fintechs valued at more than $1 billion. The Unicorn Club has more fintech unicorns than any other verticals. Over 50 percent of this increased growth round in 2018, with Plaid, Circle, LendingHome, Root, and Brex making their first debut on the U.S. fintech unicorn list.
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