Fintech on the rise during COVID -19 & Lessons from VCs in Fintech investment
The COVID-19 pandemic has posed many challenges to the business world, especially to Venture Capital (VC) investment, when the risk factor is now multiplied given the increasing uncertainty sentiments. However, as individuals and businesses are trying to recover and respond to changes, along with challenges there are opportunities arising. This applies well to the Fintech industry, where businesses and financial institutions are collaborating to facilitate seamless digital finance for customers and corporations. Digital financing is no longer an additional fancy service package, but an essential when everything is expected to operate online.
According to a Fintech investment report by KPMG International, the first half of 2021 has seen a strong rebound in Fintech investment, with respect to both deal value and deal amount. The momentum is expected to carry on to the second half of the year, with focus spanning wide to different segments of Fintech, including
cryptos (trading platforms, NFTs, etc.)
Cybersecurity (fraud management, password-less security)
B2B services (banking services, not only in the payment sector but also in insurance, wealth management, regulatory, etc.)
So how has Fintech been riding the COVID-19 wave?
A study from Deloitte, “Beyond COVID-19: New opportunities for fintech companies”, has identified several advantages that the industry can leverage during times of the pandemic.
Expertise in data processing – a skill underlying credit and line insurance
Strong focus on digital customer experience
Leverage of partnership and collaboration – digital service providers are accustomed to shaking hands with large financial institutions (e.g. banks, funds, etc.) to complete the service chain
Unburdened by the complex, disparate, legacy systems – allowing them to quickly integrate cloud-native approach and take advantage of API system.
In short, fintech’s differentiated capabilities, agility, and innovation are helping it not only to survive the pandemic but also to take the opportunities and create breakthrough disruptions. As the huge potential of Fintech has proved itself a lucrative investment, let’s dive into some insights from VCs – one of the main sources of funding behind this rising industry.
Inside from VCs – main sources of funding behind this rising industry
FinchCapital, a Fintech and AI focus fund, believed that the crisis accelerates a “fundamental shift” in the lives of people and businesses, and this is where disruptive Fintech companies step in to help society respond to changes. While severe impacts are being seen across all industries, FinchCapital believes in the light at the end of the tunnel for these innovations, especially in the field Insurtech, Proptech, and Online mortgage, because post-Covid, a contact-free, data-driven, and insurance-protected lifestyle is the new normal.
In a webinar on Fintech investment (2021), representatives from DoVentures and Touchstone Partners – two significant players in Vietnamese VCs, expressed positive views on the future of Fintech, especially in Wealth management and online loan/mortgage/ BNPL (Buy now pay later) sectors. The movement is also supported by the State Bank of Vietnam (SBV)’s process of drafting a new decree on Fintech regulations, which will clear some of the grey areas and benefit fintech businesses, especially P2P lending largely. It was also emphasized that for such a sophisticated industry like fintech, the investors are looking for startups whose teams comprise both financial and technology experts. While the combination is clear in the industry’s name, such well-rounded expertise is not easy to find. Ideas that involve both integrations of new technology and response to financial system issues are more success-guaranteed.
Manuel Silva Martinez, Partner from Santander InnoVentures (SIV), also shared his interesting views on fintech investment after researching the industry’s global movement. Whilst being an advocate for “classic fintech” (mentioning “B2B blockchain application in the capital market”), the fund is also eyeing more forward-looking segments of fintech that directly drive customer decision makings. Similar to the aforementioned fund partners, Manual also named Proptech (mortgage cycle), Mobility (Car ownership), Logistic (trade and supply chain finance) being some of the potentials to pay attention to in the coming years.
In general, the pandemic has placed all businesses under distress, and fintech is no exception. However, with its high adaptability and data manipulation expertise, fintech is acing the crisis, through providing businesses and end-customers with innovative solutions that come as saviors during difficult times. Given the increasing trend of fintech investment, we expect the industry to thrive even further and create disruptive changes to our societies when COVID is behind.
To learn more about insight into fintech investment from VC’s point of view, why don’t you take a chance to join our upcoming event called Etalk Adventure to the Venture on Thursday night 23.09.2021 at 07:00 PM (VNT)