The financial technology (fintech) industry is one that has gained increasing attention over the past several years. The term encompasses the combined technological innovation that has brought finance into the twenty first century. People are drawn to this industry because it has not yet been clearly defined and is an easy identifier for non-traditional companies.
In a survey, PWC estimates that “within the next 3-5 years, cumulative investment in FinTech globally could well exceed $150 billion.” For an industry with such loose determining guidelines and incredible investment, fintech is an area we should be paying attention to.
A McKinsey survey argues that “perhaps the most exciting area of fintech innovation is the use of data.” The data analytics industry is growing as fast as the fintech industry. Companies are able to capitalize on their data and take critical steps ahead of competitors who are not able to do so. The most important aspect of a financial decision is often time, and now companies are able to analyze data at a rate that helps them make the best decisions. The data aspect of the fintech industry allows firms to adapt much faster and be more flexible and ever before; it is the backbone that supports the success and growth of the industry. Companies that are embracing technology and using data are the ones that are remaining competitive and will be successful in the long term.
“83 percent believe that part of their business is at risk of being lost to stand-alone FinTech companies.” PWC estimates the disruptive nature of fintech companies is the threat that seasoned companies are scared of. Many fintech companies are startups that are able to compete with financial giants because they have technology and resources that are more forward thinking. They are forcing traditional financial service firms out of their comfort zones because they can offer the same products and services at a much lower cost. The influx of startup companies, fintech or not, is changing the landscape of how businesses exist.
“75 percent of people think the most important impact FinTech will have is increased focus on the customer.” Companies such as Etsy and Uber are finance and data behemoths and have business models focused on providing products and services directly to consumers. With the use of new technology, companies can get to know their customers more intimately and create a relationship that is depended on the customer’s unique preferences. In a time that places a strong emphasis on transparency, fintech technology is helping companies be transparent towards their clients.
Thanks to the fintech industry, money is cool again; it is also changing how we interact with our finances. This industry is taking us into an era where we store our checks and credit cards on our cell phones and only interact with money digitally. Fintech companies are maximizing on this trend and offering these services to clients for fees that are lower than their banking counterparts. The flow of funds from person to person is getting easier and giving fintech companies a competitive advantage. In a time when big banks were facing challenges, the financial crisis of 2008 arguably opened up a place for fintech companies to come in and claim market share. The smaller firms have been able to react to trends in market demand, and create a niche that has had a lot of success so far.
The future of the fintech industry is unclear, but has an overwhelmingly positive support. Combining finance with technology and data has expanded the capacity for traditional finance companies, and has opened the door for a generation of new ones. Fintech is reshaping finance and bringing it into the future.