Fintech, short for financial technology, is the application of any technology to make traditional financial services more convenient, more secure, and more rapid. Over the past decade, fintech has reshaped the financial industry in a myriad of ways, and this year was no exception. In 2019, big tech companies continued to encroach on the financial industry's turf, traditional financial companies merged to form larger companies, emerging markets were exposed to more technological services than ever before to assist with financial tasks, and a wave of consolidation swept the payments industry.
All of this led to the revelation of the ultimate winner -- you! The average consumer now has access to faster, superior, more secure financial services than ever before. Let's take a closer look at the most important takeaways for investors from the world of fintech over the past year.
A tidal wave of consolidation
For investors, any conversation centered on fintech in 2019 has to begin with the massive wave of consolidation in the space, with three of the four largest fintech deals ever completed happening this year.
The year's biggest acquisition -- and fintech's largest ever -- took place when Fidelity National Information Services (NYSE:FIS) acquired Worldpay for $33.5 billion. This megadeal combined one of the largest issuer processors, Fidelity National, with one of the largest merchant processors, Worldpay, a theme echoed with many of the year's other large deals, including Global Payments' (NYSE:GPN) $22.1 billion acquisition of Total System Services and Fiserv's (NASDAQ:FISV) $21.8 billion deal with First Data.
While all three deals cited significant cost savings and revenue synergies that would result from the pairings, fear of disruption from newer entrants in the market was also expressed in the conference calls following the announcements of the deals.
Fiserv CEO Jeffery Yabuki specifically called out Square (NYSE:SQ) for causing fear within the banking industry, saying, "I mean, a lot of banks, especially in the community spaces, are worried about companies like Square." FIS CEO Gary Norcross also noted the intense competition within the industry, saying, "[T]here's a lot of innovation going on. There's a lot of modernization going on. Our clients need to continue to look to compete in this very aggressive market. You've got disruptors coming in ."
A new credit card
One of the biggest fintech stories of the year, was Apple Inc (NASDAQ:AAPL), in conjunction with Mastercard and Goldman Sachs, releasing its long-awaited credit card. Many of the card's details were decidedly consumer-friendly, but hardly revolutionary, including features such as no annual, international, or late fees, weekly spending reports, and generous cashback rewards for those who use it within Apple Pay. The Apple Card even features a real-time interest calculator that shows cardholders how much interest they will pay based on their payment amount .
The biggest advances introduced with Apple's card, however, are its advanced security features. The card number is not displayed on the card, making it harder to steal. Rather, it is generated and locked away entirely on one's iPhone. Every purchase requires that number along with a one-time security code (similar to how EMV chips work), which can only be authorized by users' Face ID or Touch ID on their iPhone.
The new Apple Card probably represents big tech's ultimate effort this year to lure consumers away from their traditional financial institution.
The rise and fall of Libra
In June, Facebook (NASDAQ:FB) announced Libra, its version of a cryptocurrency powered by blockchain technology. The program was backed by major e-commerce and payments platforms when it was first announced, though many have since backed out over regulatory concerns, including Booking Holdings, eBay, Mastercard, MercadoLibre, PayPal Holdings, Stripe, and Visa.
The currency will be backed by a basket of fiat currencies from around the world, including U.S. treasuries, which will theoretically reduce volatility. While Facebook has rightfully not earned the benefit of doubt from the public, there is reason to believe the eventual creation of such a currency would benefit emerging market consumers, many who are still un- and underbanked.
Maybe the biggest stamp fintech had on 2019 was making investing more accessible than ever before as commission fees at most major brokerages dropped to zero, allowing investors to buy and sell stocks for free. While fintech start-up Robinhood has existed as an app-only brokerage offering $0 trades for several years, Square began offering bitcoin trading and free stock trades on its popular Cash App earlier this year.
That's when the dominoes really began to fall. The biggest piece of the puzzle occurred when Charles Schwab Corporation (NYSE:SCHW) offered $0 trades in early October, the first major brokerage to do so. Within days, others followed, including TD Ameritrade, E*Trade Financial, and Fidelity.