The state of Fintech in 2021

As we mark the start of a new working year it seems an appropriate juncture to take a look at the state of play in the world of fintech, the trends that were prevalent in 2020 and which could continue to shape the industry in 2021.

One way to achieve this is to look at how consumers accessed and used fintech over the last 12 months and a report from mobile data consultancy Sensor Tower helps us to do just that.

Consumers and end-users continued to download fintech apps in 2020 part of an upward trend that has been developing over the last 4 years.

What’s interesting in particular is that growth rates in Apps downloads vary distinctly between the two main app ecosystems with Google’s Play Store seeing a 51% growth in Fintech app downloads in the first half of 2020 when compared to 2019. Whilst the Apple App store saw growth of just 8% year over year in the same period.

That growth was driven in part by key regional trends with Android users in Brazil making 100 million downloads of Fintech apps in 2020 whilst Chinese consumers downloaded 50 million fewer apps from Apple’s App Store, a reduction of some 27 million downloads according to the Sensor Tower research.

Android’s supremacy in Brazil may be explained by the fact that an iPhone 12 can cost the equivalent of $1270.00, minimum monthly wages in Brazil are a fraction of that figure.

In terms of the most downloaded Fintech Apps in the US in 2020 Square’s cash app remains in pole position for the fourth year in a row with Venmo (owned by PayPal) and PayPal coming second and third respectively the duo have been in the top four downloaded apps for the last four years.

Given the sharp spikes in retail trading and interest in the markets seen in 2020, it’s perhaps no surprise to find that Robinhood’s commission-free trading App in the top four most downloaded apps of 2020 in the USA.

In terms of a sector by sector breakdown of app growth in the US in 2020, apps related to asset management, credit cards, cryptocurrencies, and mobile payments saw the strongest growth trends.

To calculate those growth rates Sensor Tower used data from App stores that was gathered for 60 days after the 200th case of Covid -19 had been diagnosed in the US. They then compared that data to records compiled before Covid took hold.

Fintechs are now making meaningful in-roads into traditional banking markets. Whereas digital penetration in the US was as low as 1.0% in 2017, in the first half of 2020 that penetration rate had risen to 25% up from a figure of 21% seen in 2019. Equivalent to a year-over-year growth rate of 19%.

Simply being digital wasn’t enough to tempt US consumers either it seems. The top 5 traditional banking apps in the US saw only a 2.0% growth in downloads of their apps in the first half of 2020.

Overall the report suggests that there are considerable opportunities for Fintech in underserved markets such as those in Latin and Southern America and that the effects of disruption are now being felt by incumbents in developed economies and mature banking markets.

That suggests two things: First that Fintech’s who have a story and a product that fits these themes should find it relatively easy to raise funding in 2021, particularly if they can demonstrate growth in the uptake of their apps. Secondly that more established Fintech’s will become M&A targets for banks and other institutions looking to protect and future-proof their existing franchises.

Though whether large bureaucratic enterprises can ever adapt to the agile and consumer-focused business model employed by many of the disruptors is a moot point.