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Fintech Companies Post Higher Profits Than Big Banks – How Did It Happen?

Swiping smartphone for payment processing demonstrating Financial Technology

Fintech is a very frequently used term describing financial innovation as well as revolutionary experiences in the financial world. It is a technology that we are all very much used to by now, and it has changed many aspects of our daily lives. Thanks to Fintech, everything from ordering food, or buying clothes online is a lot easier than ever before.

The recent market data indicates that the Fintech companies are developing further, taking over the global financial institutions. This includes not only earnings but also market capitalization. The data gathered in the April-June quarter indicates that the Covid-19 helped the acceleration towards the cashless society, in which, Fintech plays a huge role.

Recently, the CEO of PayPal said that during the Covid-19 pandemic, the world witnessed numerous small, but important changes, that could have a lasting impact on the financial world. The net profit of PayPal jumped as much as 86 percent in just a year and recorded profits of $1.53 billion in the second quarter of the year.

The company’s data showed that amid the online shopping market growth due to the pandemic, the company’s payment services saw an increase of 30 percent.

But, PayPal is not the only company posting profits. Fintech companies around different industries have posted great increases, which is helping the FIntech industry further develop.

One of the industries that saw massive growth during the pandemic was Forex trading. Many of the Forex brokers in the market posted a huge increase in profits. For example, Finotec, an FCA-regulated broker posted a 41% increase in revenue in 2020.

As for the volume-based transactions, it increased by 110 percent. The profits of the best Forex brokers compared shows that the majority of them posted increased profits in 2020-2021. There are numerous reasons for this, one of which is the Covid-19 pandemic. During the pandemic, the demand for trading services increased a lot.

Leading Fintech companies from China have also posted increased profits over the past few years. It is not only large Fintech companies that saw increased profits, this also includes many small and midsize companies.

Higher profits posted by Fintech companies

One of the leading Fintech companies around the world, Ant Group, posted equity method profit to almost $400 million in the previous quarter. The net profit of the company is thought to be around $1.3 billion.

There are numerous services offered by Ant Group, and as they continue to expand, the profits of Ant Group continue to increase. As of now, it covers payment apps such as Alipay, smartphone banking as well as asset management.

In addition, it can also be seen that the profit levels of FIntech companies are the same as the major financial groups. For example, PayPal managed to surpass the profits of Citigroup, and as for the Ant Group, it recorded almost the same performance as Credit Suisse.

A very interesting development is that the valuations of Fintech companies are a lot bigger than the valuations of large banks. For example, the official data indicates that the valuation of PayPal is $240 billion, which is 80 percent more than the combined valuation of the three leading megabanks of Japan.

On the other hand, the usage of credit cards declined over the last quarter. Still, Visa saw profits increase by 23 percent. As for Square, which is a credit card company mainly focusing on small businesses saw a loss in the second quarter.

The importance of Fintech

Over the past few years, Fintech has created numerous applications that have forever changed the way people access finances. There are numerous industries using FIntech, for example, crowdfunding platforms.

These companies are using a range of Fintech applications to quickly gather funds and allocate them. Then, there is blockchain technology and cryptocurrencies. These are some of the best examples of Fintech, and what it can do for society.

Mobile payments have developed very much over the past few years, which has helped people around the world pay for their necessities a lot easier. For example, some of the most popular mobile payment solutions are Apple Pay and Alipay.

The ongoing Covid-19 pandemic showed exactly how Fintech companies can help society, especially in hard times. One of the biggest advantages offered by FItech is the financial inclusion that it creates.

Fintech makes sure that financial services become available and accessible for people who may have never had the chance to use financial services before. For example, in Africa, companies such as M-Pesa and Tala have revolutionized how people manage their funds.

Another thing making Fintech a very important technology is that it is more cost-effective. These companies are almost always capable of delivering the same solution for a lower price when compared to traditional financial institutions.

These companies are taking advantage of the technology and the best sides of it and they manage to automate tasks, which helps them save money. Rather than employing a lot of people to do the repetitive work, these companies are using technology to do so.

Not only is it making Fintech companies more cost-effective, but it also takes away the chance of human error, making things more accurate.

Because of all these reasons, the increasing adoption of Fintech around the world is not a surprise at all. Due to the ongoing Covid-19 pandemic, the demand for fast, efficient, and high-quality financial services has increased a lot.


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Nordic FinTech and the Future of Finance

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