And here to stay it is. If you haven´t been paying attention, words such as Internet of Things, API, Big Data, Data aggregation, Digital Native, Encryption, Single Sign-On (SSO), Sharing economy, Finserv, Hacker, Disaster recovery, SAAS, cryptocurrency, crowdfunding, Bitcoin, Blockchain etc. have become mainstream. No longer are they just confined to certain industries. They have become daily trends. The financial services industry is undergoing unprecedented changes in its history as technology is disrupting and reinventing many aspects of the financial system.
What is FinTech really?
For a majority of people, FinTech or Financial Technology can broadly be categorized into 5 areas:
1. Legacy Enterprise Software
– FinTech companies have been able to disrupt the financial institutions to a point that they are now providing effective and streamlined B2B software for a variety of processes and business concepts traditionally undertaken by the financial institution themselves.
2. Emerging Technologies
– This is perhaps where the most excitement in FinTech lies because of some of the ongoing developments, advances, and innovations in various fields.
a) Alternative Finance
– The financial sector has started to now see major disruption involving the whole lending regime. It is no longer safe for banks to assume that their core lending regimes are safe from disruption.
b) Payments
– This is by far the most disrupted financial sector. Within the Payment ecosystem, the whole end-to-end payment ecosystem is under constant attack from FinTech companies looking to streamline archaic bank processes.
c) Personal Wealth Management
– Private client firms have long enjoyed a monopoly in this sector. The term “wealth management” is thrown around by financial advisers without an actual definition. FinTech firms have been able to provide processes of meeting the needs and wants of clients.
d) Blockchain Technology
– If you haven’t heard of Blockchain you are not alone! The ledger system behind cryptocurrencies such as Bitcoin is here to stay. Bitcoin as the main pioneer might not survive in its current version 1.0, but the Blockchain technology is here to stay. It presents a tremendous opportunity for application into other sectors and not just cryptocurrencies.
The excitement surrounding FinTech is however being hampered by regulation such as the new PSD in Europe, which is projected to have a big impact on startups. It´s the dirty little word that seem to follow FinTech. A concerted effort needs to be undertaken to lobby all the Stakeholders worldwide in order to figure out what the opportunities and financial burden are in time.
What do you think the true impact of regulation on the speed and nature of innovation within FinTech is? I´d love to hear from you if you think I have missed anything.
“The financial services industry is undergoing unprecedented changes in its history as technology is disrupting and reinventing many aspects of the financial system.”KEVIN MOSERI