Coinbase has been the talk of the town recently, with the company going public via direct listing on April 14 with a valuation of nearly $100 billion. On the day of its debut, Chainalysis Chief Economist Phillip Gradwell told the Exchange that “Coinbase’s $100 billion valuation today demonstrates that venture investors can make great returns from putting money into crypto companies, not just cryptocurrencies. That proof point is good for the entire ecosystem.” 1
Crypto companies are a subset (albeit a large subset) of businesses catapulting financial technology into the spotlight. Not only will we continue to see more FinTech innovation from behemoths and start-ups alike, but the transformative technology being introduced to the market will support and challenge traditional banks and other legacy financial institutions in their efforts to modernize their systems and applications – all at a greater speed.
The FinTech catalyst
Financial technology has been the beneficiary of a massive amount of investment since the 2008 stock market crash that precipitated a rash of new regulations on banks. The products, services and apps that have come to market since then have filled a void, providing new tools and resources to improve financial literacy, and help the masses gain and maintain financial wellness.
Fast forward to today, and FinTech isn’t just a buzzword – it’s embedded into our everyday lives. There’s trading app Robinhood, which will likely reach a $50 billion valuation with its recent funding rounds 2, and Plaid, an infrastructure provider that helps other financial services apps connect to consumer bank accounts. These are just two of a class of companies democratizing the investment paradigm and enabling even more innovation within the financial industry – increasingly across other sectors as well.
The challenges addressed –and the opportunities created –by FinTech innovators has catapulted investor interest to the next level. In 2020, the FinTech industry saw over $182B in capital invested, and just a few months into 2021 has seen over $75B invested. 3 Online payments provider Stripe raised $600 million in March, valuing the company at $95 billion, almost three times its $36 billion valuation from April 2020. Meanwhile Affirm, the leader in the buy-now-pay-later sector, went public in January, quickly reaching a $24 billion valuation. 4
Seize the opportunity
This sharp uptick in FinTech investment has created an opportunity for traditional financial institutions to partner with these organizations to optimize their current processes and digitally transform to better meet the wants and needs of their customers. Take payment processing for example. By leveraging blockchain technology, banks will soon be able to validate financial transactions in real-time versus the current three-day standard.
The growing herd of FinTech unicorns and newly public entities are an integral component in streamlining outdated systems. Investors getting involved now will be part of solving today’s financial challenges and creating new opportunities for not only every business, but every individual.
Find the next unicorn on the Forge marketplace.