Fintech: Shaking up the Financial Industry

by Joseph Walent 0

The changes underway in how financial services are delivered are increasingly being noticed by folks outside of direct involvement in the payment and retail banking industry, as evidenced by the 60 Minutes report on Fintech airing last night. The sentiment of expanding the economy by lowering barriers to entry will encourage more people to participate directly and thereby help to invigorate grassroots business activity was some of the battle cry.

We want to free businesses from just selling via credit cards, you know, to people who hold bank accounts, and instead, enable people to purchase online no matter what it is that they use, bank account or no.

The investments in financial technology innovation, demonstrated by Stripe and its peers featured in the 60 Minutes story, have created conditions that allow for more fluidity in the economy.

Well, there’s no question the crisis demonstrated that the system didn’t work. And when you looked at the aftermath of the crisis, what needed to be done. You had to make sure banks got back to the basics of banking, and that they had to address the trust issue.

By addressing issues of speed and veracity in fund transfer between parties and providing non-conventional schemes to effect transaction activity, the increasing number of fintech firms are providing impetus to the established players to build, buy and/or ally with fintech firms to incorporate technology-enabled methodologies at a faster pace than they wanted.

I think there’ll always be a need for sort of somewhere to store your money, to have it sit. And, we think, you know, for all their flaws, they have a lot of experience at being banks, right?

But fintech is targeting nearly all the other functions of banking. The startups are peeling off one profitable service after another, typically offering them for less. It’s called “unbundling the banks.”

Mercator Advisory Group follows the developments and trends in the fintech market relative to the payments and retail banking sectors in its series of Fintech Review reports. The note assessing fintech activity during 1Q16 will publish shortly, and the 2015 Payments Fintech Funding: Year in Review is available now.

Overview by Joseph Walent, Senior Analyst, Emerging Technologies at Mercator Advisory Group

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