Finding value in fintech’s structural growth phase

Rapid technological adoption went far beyond remote working and delivery services during the pandemic. Over the last year, we’ve seen hyper-personalisation of insurance and more inclusivity for minority groups. There’s also been a swell of new sustainable and social impact investors.

“One of the core trends was seeing an emergence of start-ups building embedded finance products and services” said Sonal Lakhani, Head of Barclays Open Innovation Programmes, in our recent Global Sector Series webinar.

Ahsan Raza, Managing Director, Co-Head of Technology, EMEA, Barclays Investment Bank, joined Lakhani in the webinar. “We’re in a structural growth phase for the tech and fintech sector,” he commented. “[The pandemic] significantly accelerated growth for the sector and we’re going to see lots of opportunities both in public listed and private markets”.

Lakhani said: “What we have to remember is that when it comes to disaster capitalism or reset economics — whatever you call it — there tends to be big opportunities after a crisis and that’s what we’ll see here too, and there has been a global hyper acceleration in all things digital due to the pandemic”.

Indeed, this high-speed digital adoption is likely to outlast lockdown with fintech expected to undergo a structural growth phase over the next five to ten years.

There will be adjustments along the way as valuations gather pace but, the long-term trend is clear: fintech is creating opportunities for investors in both public and private markets.

So where can investors find opportunities? Many believe that big tech is over-valued. It also faces increasing regulatory scrutiny which is only expected to increase in a post-pandemic world.

Our experts indicate that embedded finance products may not only be categorised under the ‘fintech’ umbrella, but may also offer value. Put simply, embedded finance allows companies to integrate financial offerings into the buying process for a customer.

As this segment develops, investors may benefit from businesses with solid foundations, real innovation, strong economics and resilient business models. To remain attractive, companies will need to have solid and compelling margins. For years, making a profit had been - at best - a secondary concern for many start-up fintechs, but that's now changing on both sides of the Atlantic.

This article is taken from our Global Sector Series webinars, bringing you the latest insights and debates on issues facing individual industries today. To find out more about embedded finance, read our Rise FinTech Insights report.

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