Investing in cybersecurity is another intriguing avenue to explore.
In the tumultuous year that was 2020, cybersecurity investments reached an all-time high, with funding reaching $11.4 billion, a near 50% increase from 2018. This surge can be attributed to two primary factors: the rapidly evolving cyber-crime landscape and the accelerated adoption of cloud computing.
The COVID-19 pandemic, in particular, led to a significant increase in cybercrime as businesses and individuals shifted their operations online. This shift, coupled with the growth of e-commerce and remote work trends, prompted Interpol to issue a warning in August 2020 of further cybercrime increases.
The financial sector, heavily reliant on cyberspace during the pandemic, has been a prime target for cybercriminals. As a result, listed companies offering services like payment protection have become a staple in investment strategies. The potential returns they offer, coupled with the growing interest in cybersecurity investments, has led to inflows of venture capital into these stocks.
However, the pool of potential cybersecurity companies relevant to the financial sector and interesting from an investor's perspective remains limited. Companies like Stellar Cyber, known for its AI-driven Open XDR platform, and its partnership with Nu-Age Group providing managed cybersecurity services enriched with AI capabilities, are examples of companies focusing on protecting networks, endpoints, and cloud assets in financial institutions.
The financial sector, with its strict cybersecurity requirements such as the EU's Digital Operational Resilience Act (DORA), creates demand for specialized cybersecurity providers. Additionally, companies like Klarna, which recently obtained a full banking license and partnered with Visa, represent investment opportunities linked to financial technology and secure payment infrastructures.
The global costs of cybercrime reached an estimated $1.1 trillion in 2020, equivalent to 1.3 percent of global GDP. Worldwide financial losses due to cybercrime reached an estimated $945 billion. This increase is partly attributed to improved reporting but also to the rapid growth of cybercrime itself.
As the threat of cybercrime continues to loom large, companies must continue to invest in cybersecurity infrastructure, even after the pandemic subsides. Global spending on cybersecurity has surpassed the $145 billion mark, and Canalys forecasts a growth in cybersecurity investments of between approximately 6.6 to 10 percent in 2021.
It's crucial to keep an eye on the relative valuation of cybersecurity companies for investment purposes. The new estimate of global costs of cybercrime represents an increase of over 50 percent from the previous estimate in 2018, underscoring the growing importance of cybersecurity investments in the modern world.
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