Financial technology, or Fintech, is a great example of an industry in which the world’s top venture capital firms are investing their time and money.
According to McKinsey, there’s been a fundamental shift in adoption of financial technologies over the past two years. For example, real-time, account-to-account payment infrastructures that have emerged over recent years are incredibly popular.
There’s no question that the need to digitize finance has reached a tipping point; larger institutions are losing market share to peer-to-peer applications that don’t require an intermediary. The convenience and appeal of real-time funding without settlement fees is crystal clear.
Despite investing in major tech initiatives, legacy institutions are still play catch-up, struggling to provide services outside of their core competencies. One example is how initial attempts at mobile apps lacked intuitive UI and adequate security.
Decentralized finance applications that use blockchain are a lightning rod for innovation, and investors are betting big on the technology’s benefits and long-term value for customers.
“Investments in instant payments have begun to reap greater benefits, both in POS and e-commerce usage of instant solutions.” (“Accelerating winds of change in global payments | McKinsey”) The trend, writes McKinsey, is a response to consumer demand for speed, lower fees, and greater adoption of customer-facing applications.
As CEO of a leading family investment office, Vincent Puma, River Capital Group Holdings (River Capital) has extensive experience in finance, technology, private equity, and venture capital investing.
“The market landscape is changing, and large organizations have much harder time pivoting than smaller ventures,” explains Puma. “It’s like comparing a tanker’s ability to turn around to that of speed boat. Banks cannot make significant changes quickly due to heavy regulatory burdens and high barriers of entry.
“Another important factor influencing change is how the cryptocurrency market has attracted billions worth of capital.”
As of August 2021, the total market cap of all cryptocurrencies was estimated to be over 20 trillion. For better or worse, crypto is on the cusp of being considered mainstream.
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