Will Fintech's Bull Market Continue into 2019?
The beginning of a new year is high time for predictions. January 2018 was the peak of 2017’s cryptocurrency boom; prognosticators eagerly discussed whether its rise would, or could, continue. This year, pundits are focused on fintech – and whether it can continue its remarkable growth.
Financial technology has been enjoying a steady upwards trajectory since 2017. 2018 saw 20 fintechs reach vaunted unicorn – or $1 billion valuation – status, and the industry managed to maintain its positive path throughout the year. Experts uniformly agree on fintech’s bullish prospects for 2019, predicting another year of growth characterized by consolidation, additional VC contributions, and potential IPOs.
Fintech’s ongoing maturation has meant not only more exits (from roughly $700 million in value in 2017 to more than $7 billion in 2018) but an uptick in merger and acquisition deals. Dana Stalder and Allen Miller of fintech-focused VC firm Matrix Partners predict more of the same as legacy financial services businesses, whose scale and regulatory burdens make innovation a challenge, continue to “…acquire fintech companies in an effort to stay competitive.” They predict 2019 will be the first year to see in excess of $10 billion in fintech liquidity events. Arjun Sethi, the co-founder of Tribe Capital, echoed this sentiment to Bloomberg. “We think there will be a continued increase in M&A interest from large finance companies,” he said. “I think you'll see much larger transactions from traditional industry players as well as they evolve and become more tech stack-enabled.”
Funding was up in 2018 and experts predict that it will continue to grow in 2019 – but maybe not as rapidly if the market slows down. Vanessa Colella, head of Citi Ventures at Citigroup Inc., characterized 2018 as a “year for massive funding rounds,” with plenty of venture funds ready to buy into the space. “There is a lot of capital in the private sector right now,” Colella told Bloomberg. She predicts that the next two to three years will be particularly active, with “…more funding and big valuation bumps in 2019.” Frank Rotman of QED Investors foresees the same as “…a growing number of mega-funds…need to deploy capital in nine-figure chunks.” But he cautions that a significant economic slowdown will mean “…a modest reduction in availability of capital and rationalization of valuations as VC and PE firms become a bit more cautious in their outlook.”
Bolstered by VC funding and chastened by stock drops from early fintech IPOs, fintech companies have taken a slow and steady approach to go public. Most remain product-focused – a mentality at odds with the profit-driven ethos demanded by shareholders. But of the 20-plus unicorns in the sector, Credit Karma, Stripe, and Robinhood seem well-positioned to take the next step in 2019. Kyle Lui of DCM Ventures believes that “truly breakout companies like Robinhood will likely go public,” this year. Those that do not will continue to leverage existing capital to grow in private.
Fintech is primed for another year of growth and innovation in 2019. As the entrenched giants of global finance are forced to adjust to the disruptive power of technology, consumers stand to reap the benefits. The financial world is changing – and most specialists agree it is for the better.
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Financial analyst and market blogger with expertise in equity research, fundamental analysis, and macroeconomic trends. I regularly publish coverage on individual stocks, ETFs, and sector developments — combining rigorous financial analysis with clear, engaging writing for a broad investment audience.
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