“Fintechs” Reshape The Financial World
(3BL Media/Justmeans) â Five years ago, Thomas Power one of the U.K.âs leading minds on the digital world, new technology and the inside world of Silicon Valley, predicted that Facebook would one day become a bank. That statement created a small storm. Today, online financial platform start-ups, known collectively as âfintech,â are spreading like wildfire, each with a different idea of how to topple the powers of Wall Streetâs concentrated wealth by offering better services and lower fees. From the digital world, Bitcoin became one such trailblazer, spurring other digital/virtual currencies. A number of other companies are now finding success by innovating the existing monetary systemâthe driver of this innovation from the tech world is moneyâto disrupt the old corporate world of banking.
Last year, venture capital gave $12 billion to new financial tech start-ups, three times the amount invested in 2013. The targets of these start-ups cover the whole range of financial services: from crowdfunding to peer-to-peer lending, from wealth management to payments. The prize theyâre after is industry revenue estimated by Goldman Sachs to be $4.7 trillion.
These âfintechâ innovators are trying to reshape finance in three ways â by cutting costs: Lending Clubâs expenses are one-third those of a conventional lender, and TransferWise charges much lower fees than banks to send money across borders; by introducing new ways of assessing risk based on data; and lastly, by creating a more diverse and therefore, more stable credit landscape. One good example is Roostify, a San Francisco start-up that says it is âaccelerating and simplifying mortgagesâ with software that allows a potential home buyer to upload tax and financial documents to a secure data room, where it can then be viewed by loan officers and lenders simultaneously, making for a faster closing process with greater transparency.
We have all experienced at some point the often painful and expensive journey of applying for a loan. âFintechsâ want to revolutionise things by undercutting big banks and speeding up processes. This is a lucrative market for techies.Â Yet, starting a bank isnât like creating a dating app, as there are many regulatory hoops to jump through and drawn-out compliance processes. Plus, it also requires a huge amount of capital, especially to be able to compete with the likes of HSBC, Bank of America, Barclays, etc.
âFintechâ lenders like Lending Club, Prosper, and Zopa match a wide range of borrowers and savers, but generally on a small scale. Trying to service the needs of a big multinational, which would require billions, is impossible for such innovators at this time as no start-up has that kind of capital to deal with these type of requestsâwell, no start-up as yet. As the digital world is ever evolving and emerging, there could be something just round the corner that could do the trick.
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