Cambridge Centre for Alternative Finance Publishes Fintech Report, Reviews Industry Resilience During Time of COVID

The Cambridge Centre for Alternative Finance (CCAF), part of the University of Cambridge in the UK, along with the World Economic Forum and the World Bank, have published the Global COVID-19 Fintech Impact and Industry Resilience Study.

CCAF has long been the leading research institute reviewing the fast-growing global Fintech ecosystem. The Centre has provided a touchstone for balanced data and insight for policymakers and industry insiders for years. This most recent comprehensive review of the Fintech industry surveyed 1,448 Fintech platforms, operating in 192 jurisdictions .The document arrives following a historic time of global duress due to the COVID-19 health crisis.

Bryan Zhang, co-founder and Executive Director of CCAF, commented:

“Based on the unique empirical dataset collected, this report highlights the resiliency of the global Fintech industry during the pandemic, driven by the growth of sectors such as digital payments, digital lending and enterprise technology provisioning in key geographies. It also points to the potential of digital finance to advance financial inclusion and serve millions of unbanked and underbanked populations and MSMEs around the world.”

According to CCAF, the Fintech industry has been “more resilient to the pandemic” than initially reported in the previous COVID-19 Rapid Assessment Study – a previous report that provided a snapshot of Fintech as COVID impacted the world.  The study published today indicates that just about all Fintech verticals are growing at a faster pace than the prior report distributed in December 2020.

According to CCAF, the #Fintech industry has been more resilient to the pandemic Click to Tweet

CCAF states that retail-facing Fintech platforms have increased by 47% in gross values transacted – from $358 billion in 2019 to $526 billion in 2020. As one may assume, Fintechs in regions with stricter lockdowns have grown faster than in ones that have pursued a less rigid approach.

In general, Fintech firms operating in Advanced Economies (AEs) dominate in terms of transaction volume, surpassing those in Emerging Markets and Developing Economies (EMDEs). Growth rates for all Fintech verticals are correspondingly higher in AEs than EMDEs with the exception of digital payments – the largest market segment by global transaction volume. Government programs that provided support for impacted communities played a role as well as many Fintechs participated in lending programs as countries attempted to mitigate the economic impact of the disease.

CCAF states that retail-facing #Fintech platforms have increased by 47% in gross values transacted – from $358 billion in 2019 to $526 billion in 2020 Click to Tweet

Also reviewed in the study is the ability of Fintechs to further financial inclusion. CCAF states that a large proportion of surveyed firms’ indicated that many clients are new customers and from groups that have faced challenges in accessing financial services via traditional intermediaries. This includes women, low-income households, and Small and Medium-sized Enterprises (SMEs). The proportion of low-income households and women now exceeds more than 50% of total clients served. CCAF points to digital payments providers that report the proportion of low-income clients was 55% globally, and 73% when looking at those in EMDEs.

Overall, Fintechs reported resilience during the pandemic along with rising revenue across all verticals. These firms also reported higher valuations and capital raising activities compared to forecasts in the earlier study.

In general, some of the biggest changes within the industry were the pursuit of improved cybersecurity features and tackling attempts at fraud and other nefarious activity. CCAF states that these changes appear to have been effective.

Areas of shortcoming should come as no surprise. Fintechs need better policy support, faster approvals, and less burdensome supervisory requirements. Firms in EMDEs were said to be less satisfied with the regulatory response to the crisis than their AE counterparts.

The study divides Fintech into several different segments: Digital Lending, Digital Payments, Digital Capital Raising, Insurtech and Market Provisioning – along with several other categories. An additional separation is for retail-facing services. The data surveys 1448 different platforms with most providing retail-facing products. Digital lending, digital capital raising and payments were the top three by the number of surveyed firms.

In comparing transaction values in 2020 to 2019:

  • Digital payments grew by 30% to $492 billion,
  • Digital lending grew by 20% to $104 billion
  • Wealthtech grew by 61% to $23.97 billion
  • Digital Capital Raising grew by 33% to $13.14 billion
  • Exchange services grew by 852% to $48.66 billion
  • Digital banking and savings grew by 27% to $1.39 billion
  • Digital custody grew by 48% to $1.39 billion
  • Insurtech grew by 29% to $250 million

In comparing AEs and EMDEs, retail Fintech transactions grew by over 60% in both segments.

To quote the document:

“… the rates of growth reported exceeded the expectations of the respondent firms, as indicated in The Global Rapid Study (which was based on their first six months of activities in 2020), suggesting that activities grew at a faster pace during the second half of 2020.”

Digital assets garnered coverage as well, with CCAF reporting that 65% of retail facing firms increasing their use of digital assets especially electronic money.

“Both the exchange services and digital custody verticals reported more than 800% growth in 2020 from 2019 in absolute transaction value delivered to end-users. The top business models contributing more than 90% of the transaction volumes were concentrated within retail brokerage services, central order-book exchanges, and third-party custody services.”

CCAF shared multiple comments from supporters and project partners.

Jean Pesme,  World Bank Global Director, Finance, Competitiveness, and Innovation, said that Fintechs are transforming financial services by driving innovation and competition while expanding access to these services:

“The survey indicated that fintech firms have served  women, SMEs and low-income households—people who have traditionally faced challenges in accessing financial services.”

Drew Propson, Head of Technology and Innovation in Financial Services at the World Economic Forum, called the study highly promising for the Fintech industry:

“This resilience will be essential to weathering additional stressors as current economic and geopolitical uncertainties continue. Increased public-private collaboration around regulation will be of equal importance, and we hope that the study findings will encourage further action in this area.”

Arsène Jacoby, from the Ministry of Finance of Luxembourg, said that Luxembourg has supported the development of Fintech increasing access to capital markets:

“The growth of Fintech firms is extending the reach of capital markets and allowing small businesses to access financing from investors that would otherwise not be available to them.”

Vicky Ford MP, Minister for Africa, Latin America, and the Caribbean UK FCDO, said they were proud to partner with CCAF and  support the study:

 “The UK is committed to the growth of fintech both domestically and internationally. Advancement in fintech regulation, supported by evidence and collaboration, is critical to providing regulatory frameworks that enable novel providers and services, as well as safeguard consumers. In the context of changing market dynamics and operational challenges, this study presents valuable insights for the development of future policy and regulation to ensure the benefits of fintech reach the financially excluded and help accelerate economic growth.”

The 200-page document includes a vast amount of data and insight into the global Fintech sector and will certainly serve as a reference point for policymakers and industry insiders.

A copy of the Global COVID-19 Fintech Impact and Industry Resilience Study is available here and below.


Global Covid-19 FinTech Market Study 2022 MAIN v3_0

 

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