• Silvio Peruci, MD at App Radar


• 15.02.2023 12:45 pm
#fintech

2022 was a challenging year for much of the global tech industry. However, unlike previous tech recessions, the impact was not universally felt. Some sectors like SaaS, martech and insurtech continued to do well, while others such as speedy grocery delivery and ecommerce took big hits. The picture for the fintech industry was equally complex. Cryptocurrency companies took a hammering, in stark contrast to the success of money management apps. When we look beyond the headlines and into the actual download data for these sectors, we can start to see a clear connection between macroeconomic trends and customer behaviour.  Many of these trends are likely to continue into the summer of 2023 and provide a good indication of how the wider fintech sector will fare. 

Broadly speaking, the tech sector’s 2022 can be split between a buoyant first - riding the post-pandemic boom - and a tougher second half as the cost of living crisis hit. In fact, Q1 2022 saw 13 million new Android downloads for Europe’s 50 largest fintech apps - 30% up on the previous quarter. June is where we saw the market really start to turn. Money management apps which had experienced a solid few years saw a 46% increase in year on year downloads. At the same time, financial investment apps saw new customer growth markedly drop. You do not need to be an economist to see why that happened. As the economic outlook worsened and interest rates rose, saving cash became more prudent than risking it on investments. 

By July the cryptocurrency winter had already hit hard. App downloads for Europe’s largest trading and investment apps fell by 45% year on year in H1 and continued to remain subdued for the remainder of the year. 

Banking apps also came down from their pandemic highs but challenger Revolut saw a bumper year, far outpacing its rivals Monzo and Starling Bank. It is, however, worth remembering that traditional financial institutions like Barclays and HSBC still dominate market share in this sector. 

While it may sound like there are clear fintech winners and losers, it’s worth stepping back and seeing last year's trends in context. Although crypto apps performed relatively badly compared to 2021 and 2020, 4 million new Android users were added in H1 2022, growing the sector by 11%. The top investment apps added 1 million Android users in the UK in 2022, down from 1.8 million in 2021, but still translating to an estimated 20% growth in lifetime Google Play downloads for the sector. 

The overarching trend, which I expect to continue into 2023 and beyond, is Europeans continuing to embrace cutting edge financial tech - albeit at a slower pace than during the pandemic. As such, the outlook for fintech apps is still very positive. In January, cryptocurrencies have seen a small bull run, if that continues, downloads will follow. The trading apps that survived 2022 are likely to see substantial growth in their user base and may emerge the other side of 2023 much stronger than even during the crypto boom.  

Recent more positive economic news is likely to mean investment and trading apps see download levels closer to 2021 than 2022. However, higher interest rates coupled with high inflation should mean money management apps continue to be popular. An interesting area to look at will be how challenger banks face off against traditional institutions in relation to offering better interest rates on current accounts. We could see a lot of competition in that area which would be good news for consumers. 

Generally speaking, 2023 could see renewed interest in decentralised finance. The sector was largely overshadowed by cryptocurrencies and NFTs, but as hype has now cooled, there's ample opportunity for blockchain use cases to emerge and secure the spotlight. 

It’s worth remembering that Open Banking providers underpin the infrastructure behind most consumer facing fintech apps. Their fate is inextricably linked, as these providers largely make revenue off API calls. If, as I expect, we see a broad increase in consumer fintech app downloads and activity, we may see growth pick up for these providers resulting in more investment and perhaps some headline grabbing acquisitions. 

So - what does 2023 have in store for fintech. In short - a lot! The sector may still see some high profile failures and layoffs in Q1 and Q2, but the fundamentals remain strong. If the economic outlook continues to improve we may see a very strong end to the year and a return to 2021 growth levels in 2024.