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Tips and Tricks for Investing in Fintech

Investing in Fintech
Written by Andy

UK fintech investments are continuously growing. Investments reached $37.3 billion (£33.1 billion) in 2021, a sevenfold growth from $5.2 billion (£4.6 billion) in 2020. This is due to a global record of 5,684 deals in 2021. Funding in areas related to wealth tech, cybersecurity, cryptocurrency, and the blockchain are significant contributors to this growth.

Aside from investors’ growing interest and emerging sectors, why else should you invest in fintech, and how should you do it? Keep reading to find out.

Why invest in fintech?

Before investing, one thing investors consider is fintech’s foreseeable future. This assures you that your investment will generate returns. Fortunately, fintech has a promising future. In the UK, firms that have yet to use modern technology are realising that they need to adapt to modern times. As such, more financial institutions are collaborating with fintech companies to digitalise their processes using technologies like the cloud. Fintech providers are creating more cloud-based products that help businesses meet evolving customer expectations. Given this, it is a safe and beneficial investment.

Fintech sectors to invest in

Digital payment processing

Digital payments are increasing because of their convenience. With a simple device or click of a button, customers can pay businesses, and businesses can instantly process their purchases. Common devices used in digital payments are mobile card machines, as they are highly versatile. They enable brick-and-mortar establishments to accept both card and contactless payments so they can meet a wide range of customer expectations. On the other hand, digital wallets allow the processing of online payments. These contain a digital version of customers’ cards, making it possible to boost digital and online sales for online businesses.

Fraud analysis

Financial fraud threatens people’s data and funds. Therefore, businesses with a history of being cybercrime and fraud victims are less trusted by consumers. Luckily, fraud prevention tools are resolving this issue. These use machine learning technology to monitor, detect, and tag suspicious financial activities as fraud so any issues can be immediately addressed. This improves transaction safety, bank account security, and personal information protection. Businesses also benefit from fraud detection, prevention, and analysis tools as they help increase customer trust in a brand’s various processes.

How to invest in fintech

Contract for difference

A contract for difference (CFD) is a contract between two parties to exchange the price difference between an asset’s entry price and exit price. For instance, if you buy a CFD at £18 and sell it at £20, you will receive £2. Consequently, if you buy a CFD at £16 and it sells at £14, you will have to pay the £2 difference. CFDs do not expire and renew every time the trading day closes. Finally, trades are conducted on a leveraged basis, meaning you’re only required to deposit a percentage of the trade’s total value. While this equates to magnified losses, it also means there’s more potential for you to profit. Choose CFDs if you prefer taking big risks for bigger rewards.

Exchange-traded fund

An exchange-traded fund (ETF) is a fund that trades on exchanges. When you invest in ETFs, you acquire assets you can buy and sell during market hours. Overall, ETFs are similar to stocks, except they are a basket of securities and do not involve the actual ownership of securities. Choose ETFs if you prefer stock trading and low-risk investments. However, be ready for possible high costs and lower dividend yields.

Fintech is an ever-evolving and growing industry. Invest in fintech today to reap the benefits of its foreseeable successful future.

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