For traditional banking players and fintechs alike, the biggest threat comes from tech giants. The announcement of Yandex's takeover of online bank Tinkoff confirms their growing power in this sector.
GAFA loans total $572 billion
According to figures recently published by the Bank for International Settlements (BIS), the volume of loans granted by tech giants stood at $572 billion worldwide in 2019, 2.5 times more than the amount granted by fintechs ($223 billion). Even if total volumes remain low, growth is exponential, as in 2013 only $20 billion had been lent by these players.
Growth in credit production worldwide is mainly driven by GAFAs, while the share of Fintechs has been shrinking over the past 2 years. This trend is particularly noticeable in China, which accounts for two-thirds of global lending. Alibaba, Tencent and their financial subsidiaries rely on data from the telecoms and e-commerce sectors to provide customized credit offers. For their part, fintechs are struggling to adapt to the tightening of financial regulations in the wake of several scandals. According to an August 2020 count by China's banking regulator, 29 companies specializing in "peer-to-peer" credit have managed to maintain their business to date, whereas the market was at its peak in 2017, with over 6,000 companies.
Europe: Fintechs stay in control
In Europe, the GAFAs' presence in finance is less significant. While Amazon, Apple and Google have signed agreements with several major banks to launch financial services, fintechs manage to keep the upper hand when it comes to lending money.
However, the current health crisis could change all that. Investment in financial technology companies is plummeting. A recent study shows that in the first half of 2020, investments amounted to over $25 billion, compared with $111 billion in the same period the previous year. Only fintechs specializing in cybersecurity saw no slowdown in investment between January and June 2020. In fact, they surpassed last year's half-year record, with investments reaching $870.8 million. The most mature companies benefited the most. These include payments platform Stripe, which raised $850 million, and neobank Chime ($700 million).
The crisis should accelerate the sorting out of fintech players and lead to market consolidation.