Fintech Investments in the UK Increase – But Remain Volatile
Fintech has been a hot topic in financial circles lately, with regard to businesses, the private sector and even retail consumers. The industry has seen growing investment through the coronavirus pandemic, as well as unprecedented innovation in areas of particular interest to the tech community.
Though fintech has shown great promise through successful businesses and technological developments, it remains a volatile investment for even the most established investors. Here we’ll discuss fintech, its impressive present-day growth and the risks it imposes to potential investors.
What Do We Mean By Fintech?
Fintech is an umbrella term for a sub-industry of the financial sector that has existed for a number of decades but has seen new relevance in the present day. Fintech is an abbreviation of ‘financial technology’, and seeks to find technological solutions to financial tasks. Initially, fintech businesses were primarily concerned with digital currency, and the handling of large-scale business transactions in the early days of the internet.
With the widespread adoption of the internet and the uptake of personal online banking, the scope of fintech companies expanded to include commercial and retail solutions as well as niche back-end programming. Financing apps and retail trading portals represent popular consumer products, while legal organisations like the fintech law firm work to navigate the legal implications of new financial technology. Even today, fintech start-ups are breaking new ground with interventions in the cryptocurrency sphere, where immutable blockchain transactions and decentralised currency management promise to be the future of digital business and banking.
Recent Surges in Investment
While the economy has seen some recent shocks, thanks to the effects of the coronavirus pandemic and subsequent rise in overhead costs, the fintech industry has seen growth like no other industry, with a sevenfold increase in investment in 2021 compared to the previous year.
This growth is in part due to a large-scale purchase undertaken by the LSE (London Stock Exchange) of the financial data provider Refinitiv. However, it can also be attributed to the increased popularity of retail stock trading apps, as well as the acquisition of a number of start-ups relating to cryptocurrency innovation and credit banking.
Despite the impressive performance of the fintech sector in the first half of 2021, fintech company stocks remain a volatile investment for retail investors and larger funds. There are a number of reasons for this volatility, but much of it lies with the movements of the cryptocurrencies.
Decentralised currencies like Bitcoin and Ethereum are famously erratic in terms of their value, with significant gains and losses on a daily basis. Many fintech companies’ USP is in the handling of cryptocurrency and involves large investments and holdings in the crypto space. As the value of crypto remains difficult to pin down, so too does the value of organisations centred around its management.