What Is Intangible Asset – Meaning, Examples, And Valuation Methods

An intangible asset is a non-physical item that adds value to a business. It includes things like goodwill, patents, software, brand reputation, or digital platforms.

Let’s understand it with the help of an example

Rahul Sharma, a 32-year-old from Bengaluru, launched a fintech app in 2022. In just 18 months, the app gained 5,20,000 users and processed monthly transactions worth ₹12,00,00,000.

When valuers checked the business, they found the physical assets, laptops and furniture, were worth only ₹1,20,000. But the intangible side was much stronger. The brand was valued at ₹3,00,000, customer data at ₹1,50,000, and the software licence at ₹80,000. Together, the intangible assets totalled ₹5,30,000, which was more than four times the physical assets.

Now that we’ve seen a clear example, let’s explore why intangible assets are so important for fintech companies.

Why Intangible Assets Matter in Fintech?

Fintech firms typically have few physical assets, with their true value rooted in intangible assets like customer data, platform design, brand trust, and software licenses. According to Ocean Tomo, intangible assets account for over 84% of the market value of S&P 500 companies, highlighting their growing importance. 

In fintech, these assets enable faster growth and scalability at lower costs, startups leveraging strong brand reputation and data often grow user bases 30-40% faster than those relying on physical infrastructure.

For many fintech companies, intangible assets represent nearly all their value. For example, Stripe’s valuation is estimated to be over 90% based on intangible assets such as software and customer relationships. 

This reliance means that protecting and accurately valuing these assets is crucial, as issues like data breaches or intellectual property disputes can result in huge financial losses and damage to trust. In fintech, intangible assets are the key drivers of future income and long-term growth.

Types of Intangible Assets in Fintech:

In the fintech industry, intangible assets are the foundation of business value. Unlike physical assets such as office space or servers, intangible assets are non-physical resources that provide long-term value and competitive advantage. These assets can be created internally, like a custom-built payment platform, or acquired externally, such as a license to use a proprietary algorithm.

To help understand them better, here are 2 mini-tables that look at types and example values of intangible assets in a fintech context.

The table below shows common types of invisible (intangible) assets in fintech. These are things you can’t touch, but they still add value to a company. We've added simple ₹ amounts to show how each one might be worth something.
 

table makes clear how each type of intangible asset can be valued in simple terms to show their diverse contributions.

Fintech-Specific Example Values:

In fintech, it's important to understand that even things you can’t touch, like a brand name or a customer, list can be very valuable. These are called intangible assets, and companies often depend on them for growth and success.

Here is a concrete example table showing how particular fintech assets might be valued for a specific firm:
 

This table helps show, in a simple way, how different things owned by real or made-up people or companies in fintech can be given a money value, even if you can't see or touch them.

Valuation Methods:

In fintech, valuing intangible assets is crucial, especially since these assets often make up the majority of a firm's total worth. There are three main valuation methods commonly used: the cost method, market comparison, and income approach. Each method has its own strengths and is used depending on the type of asset and availability of data.

• Cost Method: This method estimates the value based on how much it would cost to recreate or replace the asset today. For example, if a fintech startup built a mobile payment platform for ₹2,00,000, that cost can be used as the asset’s value. This method is useful when there's clear cost data but may not reflect market or future earning potential.
   
• Market Comparison: Here, the value is based on similar assets sold in the market. For instance, if another fintech firm sold its user database for ₹4,50,000, a similar asset could be valued around the same. This method depends on market availability of comparable data.
   
• Income Approach: This estimates the present value of future income the asset is expected to generate. If a customer analytics tool is projected to earn ₹1,00,000 per year over five years, its present value might be ₹5,50,000. This method is most forward-looking.

Comparison of Valuation Methods
 

This table shows that the same asset can have very different values depending on the method used. Choosing the right method depends on the type of asset, available data, and the purpose of the valuation, such as for sale, investment, or reporting.

Recent Statistics or News:

A recent study finds that fintechs, like most internet-based start-ups, often have almost all of their value in intangible assets, as they own few physical assets.

In many fintech acquisitions, intangible assets and goodwill made up approximately 98% of the purchase price, showing their overwhelming importance in fintech deals.

These data points highlight just how critical intangible assets are in the fintech world today.

Challenges in Valuing Intangible Assets:

Valuing intangible assets in fintech is never easy. The process faces many roadblocks that make results unclear. Before we move to the specific points, let us first understand the theoretical reasons. Intangible assets are unseen, so they do not have a fixed market price. Their value depends on market moods, business use, and rules.

Here are the main challenges:

• Uncertainty: Future benefits from an asset like customer data are unknown. For example, Rahul’s fintech app may lose customers tomorrow if another app offers better rates.
   
• Volatility: Market prices of fintech brands or patents can change quickly. A new rule or competitor can cut their worth in half within weeks.
   
• Regulation: Different countries have different rules for recognising and recording intangible assets. This makes it hard for global fintech firms to compare values.

In short, the main challenge is that intangible assets lack stability and a clear way to measure them. This makes them harder to trust compared to physical assets like machines or buildings.

Best Practices for Fintech Firms:

Since challenges exist, fintech firms must follow best practices. These methods reduce errors and give a fair view of asset value. Before we go to the pointers, it is important to note that best practices act as a guide. They do not remove all risks, but they make the process more reliable.

Here are some effective best practices:

• (Forecast-based) Use projected cash flows: Firms should predict future earnings from an app, licence, or customer base. These cash flows give a base for asset value.
   
• (Benchmark-based) Compare with peers: Checking values of similar assets in other fintech firms helps give a market view.
   
• (Audit-based) Regular review: Intangible assets should be revalued often to avoid overstatement or understatement.
   
• (Compliance-based) Follow accounting standards: Using global rules like IFRS ensures transparency and helps in cross-border deals.

By applying these practices, fintech firms can reduce risk and improve investor trust. They also make financial reports easier to understand for both regulators and the market.

Conclusion:

Intangible assets are things you can’t touch, like software, customer data, or brand name but they are very important for fintech companies. These assets often make up most of a fintech firm’s value. Knowing how to value them helps in making smart business decisions, raising money, or selling the company. Even though they are hard to measure, using good methods and best practices can make their value more clear and trusted by others.

FAQs

Q. Can intangible assets appear on the balance sheet?
Yes, they can. But only if bought (like a software licence). Self-made assets like brand reputation may not always appear.

Q: Why are intangible assets important?
Intangible assets help businesses grow by offering competitive advantages, boosting profits, and building trust, like how strong brand recognition signals quality to customers.

Q: Why are intangible assets important?

They give businesses a competitive edge, drive long-term growth, and increase profits—for example, a trusted brand can attract and retain more customers.

Q: Why are intangible assets important?

They help businesses stand out, grow over time, and earn more—for example, a strong brand builds trust and keeps customers loyal.
 

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.