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2020 and the Fintech Boom

Written by Monica Savaglia
Posted November 26, 2019

Remember the days when signing up for or ordering something online took some contemplation on your part? Now, we get annoyed about how long it takes. Some of us are guilty of not reading the fine print when we sign up for or order something online. We just click and submit and hope for the best.

Our credit cards and bank cards are connected to our smartphones to make checking out online easier. We use apps that have our banks connected so we can pay our bills. 

It may seem like a century since we were last skeptical of entering our personal information, not to mention anything related to our finances, online, but we’re far away from that now.

Our finances and technology have intertwined, and there’s no stopping it now. But that doesn’t mean it’s necessarily a bad thing, especially when it comes to the financial technology (fintech) sector. 2020 is promising big things and big changes ahead for this sector. 

So what does this sector consist of? These companies are focused on developing innovative technology in areas such as online and mobile payments, big data, alternative finance, and financial management. According to a CB Insights report, fintech has attracted $24.6 billion in venture capital and a record number of fund-raising mega-rounds in the first three quarters of 2019. 

Fintech is also changing the way big banks operate. Statista reports that in 2018, around 70% of senior banking executives said it was vital for them to focus on collaborating with fintechs and bigtechs to create new services for their banks. The desire for fintech services is growing not only in the U.S. but also around the globe. 

Fintech’s Global Boom Is Here

In 2016, the UK wanted to improve innovation and competition in financial services, so it decided to simplify its regulation for startups and forced its nine largest banks to make their customers’ data accessible to others. 

According to Accenture, London consisted of more than half of all fintech investments in 2018. The decision to simplify regulations was a wise one for the country. It created an “open banking” way to the bank, and it inspired a fintech hub that has become extremely beneficial to the UK.

In Mexico, regulators have been focused on how they can create new legislation to address financial inclusion. Some of Mexico's new legislation includes the Fintech Law, which created a framework on how to regulate digital financial products like crowdfunding and electronic payment software and established a formal process for registering and operating a fintech firm.

Mexico has become a regional leader, with more than 273 fintech ventures operating in the country. Brazil has 380 fintech ventures. 

These countries make up 56% of the region’s total fintech activity. Because of Mexico’s new legislations like the Fintech Law, there has been increased interest and investment in Mexico’s fintech.

In May 2019, Japan’s SoftBank Group invested about $20 million in the Mexican payments startup Clip. SoftBank is also said to be in negotiations with Mexico’s Konfio, which helps small businesses secure loans. This is just some of the investment that is going into Mexico’s fintech hub, which will likely see more growth and interest going into 2020.

Open access banking is a risk. It could increase the chance that banking data could get lost, stolen, or misused. However, it looks like for many officials, the rewards are higher than the risk — the rewards being more competition and innovation in the financial services industry. 

As 2020 is expected to be a big year for fintech all around the globe, we could start to see more private fintech companies making their way to becoming publicly traded companies. One of those companies is Bill.com, which filed for its IPO earlier this month.

One of Fintech's Unicorns, Bill.com, Files for its IPO

On November 15, 2019, the unicorn fintech company Bill.com filed its S-1 with the SEC for its IPO.

Bill.com is a payment software company that was founded in 2006 by René Lacerte. The company is headquartered in Palo Alto, California, and has raised a total of $347.1 million over its existence. In April 2019, it brought in $80 million in a financial round that pushed the company to unicorn status. Bill.com has other well-known and big investors like MasterCard, Fidelity, Silicon Valley Bank, and Bank of America. 

In its S-1, the company said it has over 81,000 customers using its platform “to manage their financial workflows and process their payments.” The company is growing steadily. It reported $35.2 million in total revenue for the third quarter of 2019. This is a 57% increase from the prior year’s period, which reported $22.4 million in the third quarter of 2018.

The company provides a valuable resource to the small and midsize business (SMB) market. In its IPO filing, the company described itself:

We are a leading provider of cloud-based software that simplifies, digitizes, and automates complex back-office financial operations for SMBs. By transforming how SMBs manage their cash inflows and outflows, we create efficiencies and free our customers to run their businesses...

Customers use our platform to generate and process invoices, streamline approvals, send and receive payments, sync with their accounting system, and manage their cash. We have built sophisticated integrations with popular accounting software solutions, banks, and payment processors, enabling our customers to access these mission-critical services through a single connection. As a result, we are central to an SMB’s accounts payable and accounts receivable operations.

Bill.com is just a glimpse at what 2020 has to offer for fintech IPOs. More and more countries are realizing the importance of establishing themselves in the fintech sector. The global market is expanding. 

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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