Fintech Is Killing Banks — $23 Trillion Opportunity Ahead
Bank stocks are in the gutter.
Bank of America has fallen 30% this year. Citigroup is down 44%. Wells Fargo plummeted 54%.
Banking as we know it is on the road to extinction. Like most industries, traditional financial services are being disrupted by innovative technology.
Meanwhile, the pandemic has accelerated technology adoption around the globe, and financial technology (fintech) stocks are soaring.
Even after the rally this year, fintech stocks still have plenty of room to run. And I believe investors are still underestimating the opportunity.
The Future of Finance
Fintech is rapidly taking a share of the $23 trillion financial services industry. And it’s showing no signs of slowing down.
Younger generations, such as millennials and Generation Z, are prioritizing convenience and low fees, which has led to a surge in fintech adoption.
As these generations mature and their income and net worth rise, financial technology will see a simultaneous increase in demand.
For example, e-commerce is becoming the preferred method of shopping globally and will be a long-term growth driver for the fintech industry.
That’s why the $3.5 trillion e-commerce market is expected to nearly double to $6.2 trillion by 2027.
A Key Factor in Fintech’s Growth
The growing e-commerce industry will drive demand for financial technology, such as mobile payments.
Mobile payments are dominating e-commerce transactions globally and have been a key factor in fintech’s growth.
In 2019, 42% of e-commerce payments were made from a mobile or digital wallet. This number is expected to surpass 52% by 2023:
(Source: Worldpay Global Payments Report 2020)
The rise in digital and mobile wallet payment volume is driving user engagement, setting the stage for other products and services such as investing, lending and insurance.
These are huge opportunities, to say the least.
More Huge Gains Are Coming
In 2020, global revenues from lending, life and health insurance and asset management are expected to be $6.7 trillion, $4.4 trillion and $650 billion, respectively.
That’s nearly $12 trillion in revenue up for grabs.
And fintech companies can offer solutions to the consumer at a lower cost since they do not have unnecessary overhead expenses.
As a result, profit margins for fintech companies dwarf those of traditional financial service companies. For investors, this means more huge gains are coming.
The chart below says it all.
Over the past three years, the total value of fintech stocks has increased by 272%, while the value of U.S. bank stocks has declined by 30%.
Fintech’s Growth vs. U.S. Bank Stocks’ Growth
Ian King and I anticipate this trend to continue for decades to come.
That is why we recommended an innovative company leading the fintech revolution in our Automatic Fortunes service.
Analyst, Automatic Fortunes