Why are investments in the fintech sector set to break records this year

The fintech investment sector has grown considerably this year, leaving valuations of up to $36 billion for some investors.

Humberto Herrera Rincón Gallardo, investor and speaker, made an analysis in which he concluded that it is the current health crisis that has accelerated capital investments in the fintech sector in an unprecedented way.

“It is incredible the progress that well-structured fintech companies have made in the last few months, literally the three or five-year growth projection was achieved in less than six months,” added Humberto Herrera Rincón Gallardo.

The businessman pointed out that this represents an acceleration of innovation that will directly benefit society in general, especially the younger generations and even sectors of the population with scarce resources.

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Fintech companies are likely to continue to develop at a fast pace

The investor added that these modern financial tools will make it possible to bring poor sectors into the banking system, which would not have been possible with traditional banking.

In view of this, Humberto Herrera said that not only the number of investment rounds draws attention, but “something that I find extremely interesting is not only that it has increased interest, but also the size of the investments that have been made.”

“For example, the investment app Robinhood recently raised $320 million, or Stripe, which specializes in collections for e-commerce sites, raised $600 million to a valuation of $36 billion. These are incredible amounts, higher even than the capitalization of many medium-size banks,” he explained.

Meanwhile, the British bank, Monzo, based in London, England, reported that it closed $78.9 million 960 million pounds) in complementary funds, in a context of financial turbulence because like other technology companies in the sector it is seeking to come out ahead of the crisis caused by Covid.

Likewise, the example of Robinhood, the U.S. discount broker, closed a financing of $320 million during the month of July.

This is in addition to the $280 million more it had raised during May and the $323 million in just the middle of last year, so it currently maintains a valuation of $8.6 billion.

Is traditional banking a sector threatened by the fintech sector

In this regard, the entrepreneur said that fintech companies that are focused on investment, have had a great year, because it is consumers who seek to accumulate and use their cash.

Herrera Rincón Gallardo added that “traditional banking really has no idea of the challenges they will have in the next 10 years, with respect to the speed with which fintech companies move and the excellent service they provide. To begin with, today we continue to see how traditional banking insists on opening more face-to-face branches, something that will be completely obsolete by 2020. Traditional banks do not understand that the branch today is the user’s smartphone.”

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(Featured image by cegoh via Pixabay)

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First published in nacion321, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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