The global fintech market attracted nearly $220 billion of investment in 2022, of which technologies related to payments, cryptocurrencies, banking services, and asset and wealth management contributed nearly 80 percent, said global management consulting firm McKinsey& Company.
There were several changes to trends in financial technology investment. The amount of money raised in a Series D funding round or later rounds accounted for nearly 65 percent of the total last year, up from about 35 percent in 2020, signifying that investors paid more attention to business and monetization models than fresh ideas, said McKinsey in a recently published report.
While the majority of fintech investment came from Europe and North America, which contributed 72 percent of the total last year, such investment increased rapidly in emerging markets. Asia saw an 18 percent growth year-on-year, higher than the 5 percent growth in Europe and North America during the same period.
Although private equity firms remained as primary fintech investors in 2022, their investment in this field dropped by 14 percent year-on-year. At the same time, technology companies” investment in financial technologies increased significantly by 63 percent year-on-year, revealing their intention to open another front in the financial sector by making strategic investments, the report said.
McKinsey listed artificial intelligence, cloud computing, metaverse, blockchain and Web 3.0, next-generation communications, next-generation integrated development, and trust frameworks and digital identities as the seven technologies that will reshape the pattern of the financial sector in the future.
“These technologies will have a disruptive impact on financial institutions in various aspects, including marketing, product development and operational risk management. Financial institutions should continuously provide drivers for their business innovation and the development of the fintech ecosystem by building their own innovation incubators, joining hands with external agencies to develop fintech accelerators or establishing a fintech investment fund,” said John Qu, senior partner at McKinsey.
Large banks, insurers and securities companies have gradually turned from experimenting with fintech applications to widely promoting the use of such applications, said Han Feng, partner at McKinsey.
“We believe that fintech applications will enhance the customer experience, foster product innovation and significantly improve business efficiency,” Han said.
Earlier this year, Industrial and Commercial Bank of China, the country’s largest State-owned commercial lender by assets, launched a metaverse business hall in Xiong’an New Area of Hebei province.
Using the flagship business hall of ICBC as a prototype, it can provide an immersive experience and varied interactions with clients through the integrated adoption of digital twin modeling, content generation and intelligent interaction technologies.
The bank plans to expand the pilot program for the creation and operation of a metaverse business hall to its Beijing and Shanghai branches, said Jin Haimin, assistant general manager of the financial technology department at ICBC.
“We are exploring future application scenarios of the metaverse in the banking sector in a prudent manner, striving to seize the initiative in terms of technological innovation and the reform of business models,” Jin said.
Many other banks listed in China are also promoting digital transformation and deeper integration of business and technology.
China Construction Bank Corp continued to polish its expertise in technological capabilities by building platforms using artificial intelligence, big data, blockchain, the internet of things, mobile networks and agile development. The large State-owned commercial lender also independently developed blockchain technology and enhanced core technological capabilities to support key applications such as trade finance and cross-border payments, said the bank’s 2022 interim report.
Bank of China, another large State-owned commercial lender, takes digital transformation as a strategic reform to continuously enhance its capabilities to serve the real economy, said Liu Jin, president of BOC, at the Annual Conference of Financial Street Forum 2022 in Beijing in November.
Liu advised financial institutions to deepen the application of technologies such as AI and IoT in environmental, social and governance activities to build targeted and effective evaluation models and launch new financial products, thus better meeting the demand for green finance.