Forces in fintech

The outbreak of Covid-19 saw a widespread shutdown – and associated ‘stay at home’ messaging – of all aspects of global life. Although significant, the disruption triggered by the pandemic also saw an acceleration of certain structural trends that were already in place before the virus, including within the fintech industry.

Indeed, the social-distancing measures enacted to combat Covid-19 provoked an almost instantaneous change in how we access and spend our money. Themes like digital payments and digital banking have been clear beneficiaries of this ‘new normal’. Even as the vaccine drive enables the reopening of economies, we believe this is still only the beginning of the long-term fintech trend, with significant growth opportunities ahead.

Several fintech businesses with models focused on digital payments for e-commerce saw their revenues and profitability accelerate during the crisis. We see this “digitisation of cash” trend continuing in 2021, with the BlackRock FinTech Fund remaining heavily invested in these names.

We see three clear reasons why now is an attractive time to invest in fintech: the digitalisation of financial services; an expansion in fintech offerings; and the valuation discount to the MSCI All Country World Index (ACWI).

Digitalisation of financial services

Mobile banking accelerated to over 2.4 billion users in 2020, up from 800 million in 2014¹. With 73% of US consumer banking interactions occurring digitally, banking has become an increasingly technological business². We believe fintech also has the ability to tackle issues of financial inequality and accelerate financial inclusion, with around 63 million underbanked and unbanked in the US standing to benefit from digital banking services³.

Beyond the usual fintech universe

We believe the fintech universe will continue to grow, presenting opportunities beyond the usual fintech offerings. In 2020, some of the leading contributors in the space were companies operating in areas such as: digital payments in China; payment, marketplace and fintech ecosystems in Kazakhstan; and core service providers in digital currency funds and exchanges⁴.

Valuation discount

We are still seeking attractively valued opportunities to capture this fast-growing theme, gaining exposure to this exciting structural growth trend without a big valuation premium versus the MSCI ACWI and relative to the global tech index on a price-to-earnings basis.⁵

Chart: Digital payments expected to grow from 63% share in 2020 to 80% in 2030

[1] Juniper Research, March 3, 2020.
[2] Credit Suisse, If Software is Eating the World…Payments is Taking a Bite, August 2020.
[3] Source: Forbes, The Costs Of Being Unbanked Or Underbanked, 28 July 2020 according to a. 2019 report by the Federal Reserve.
[4] BlackRock, December 31, 2020.
⁵ BlackRock, March 31, 2021.

Risk Warnings

Capital at risk.
The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time.

ESG Investment Statements
This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This is for illustrative and informational purposes and is subject to change. It has not been approved by any regulatory authority or securities regulator.

Important Information
This material is for distribution to Professional Clients (as defined by the Financial Conduct Authority or MiFID Rules)only and should not be relied upon by any other persons.In the UK and Non-European Economic Area (EEA) countries: this is Issued by BlackRock Investment Management(UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 ThrogmortonAvenue, London, EC2N 2DL. Tel: + 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For yourprotection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list ofauthorised activities conducted by BlackRock.

South Africa
Please be advised that BlackRock Investment Management (UK) Limited is an authorised Financial Services providerwith the South African Financial Services Conduct Authority, FSP No. 43288.Any research in this document has been procured and may have been acted on by BlackRock for its own purpose. Theresults of such research are being made available only incidentally. The views expressed do not constitute investmentor any other advice and are subject to change. They do not necessarily reflect the views of any company in theBlackRock Group or any part thereof and no assurances are made as to their accuracy.This document is for information purposes only and does not constitute an offer or invitation to anyone to invest inany BlackRock funds and has not been prepared in connection with any such offer.

© 2021 BlackRock, Inc. All Rights reserved. BLACKROCK, BLACKROCK SOLUTIONS, iSHARES, BUILD ON BLACKROCK and SO WHAT DO I DO WITH MY MONEY are trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other trademarks are those of their respective owners. 363267-JUL21 MKTGM0921E/S-1825197