Financial technology, also called Fintech, is a line of business based on using software and modern technology to provide financial services. Fintech businesses are often small and agile startups. As such, they’re better able to disrupt traditional, incumbent financial institutions which rely less on technology and are slower to change course.
Growth of the Fintech Industry
The fintech industry received $17.4 billion in investment in 2016 alone. According to EY’s Fintech Adoption Index, 16% of surveyed consumers had used two or more FinTech services in the prior six months, with adoption potentially doubling in the near future.
Four key consumer themes emerged from the 2017 EY FinTech Adoption Index.
- FinTech has achieved initial mass adoption in most markets
- New services and new players are driving higher adoption
- FinTech users prefer using digital channels and technologies to manage their lives
- FinTech adoption will continue to gain momentum
The Disruption of Fintech
Disruptive innovation happens when new technologies alter the way markets operate. Finance has historically been viewed as an extremely technical, highly controlled sector dominated by behemoth banks that resist disruption. Consumers and businesses alike are growing increasingly frustrated with huge banks; fueling demand for innovative fintech. A long holdout for automation, finance is driving an entrepreneurial wave.
Fintech is facilitating startup ecosystems by disrupting the way small businesses start up, accept payments, and go global. In some cases, Fintech companies are providing products and services to consumers that were previously available only through financial institutions.
Fintech Meets Consumer Expectations
Consumers expect comparable levels of service from firms of any size. For startups to compete, it’s crucial that they also accept credit card payments and offer seamless mobile experiences. Fintech contributes to this great democratization of services.
The Struggles of Fintech Firms in the US Banking System
At ACHeck21, we’ve observed Fintech firms struggling to gain access to the US banking system, and the need for a bridge between the two. A Fintech Lab could address this friction by facilitating collaboration between banking, government regulators, and the financial technology industry.