Fintech Startups – Key Drivers in 2019

FinTech (Financial Technology) startups are disturbing the traditional finance sector with innovative technologies and business models. While the banking industry examines opportunities to affirm this transformation, it is important to realize the potential of collaborations. This article explains how the banking sector can leverage FinTech and encourage synergies into imperative partnerships. We will also provide a further outlook on the common destiny of both industries.

The worldwide financial industry is undergoing a transformational phase due to fast-paced technological changes. New technology startups, also referred to as FinTech, have started focusing on innovations in the finance space following the 2008 financial crisis. The objective of these startups is to revolutionize the financial industry. The FinTech industry comprises a variety of financial businesses such as online Peer-to-Peer lending, SME finance, crowdfunding platforms, wealth management & asset management platforms, cryptocurrency, trading management, mobile payment platforms, and money/remittance transfer, etc.

The FinTech Industry landscape:

In the fiercely competitive world, financial technology startups are up against the traditional financial sector. The main areas of competition are payment technologies, lending, retail banking, and SME finance. Although the global finance sector faces stiff competition from the financial technology startups uprising, there is immense potential for technological innovations in the finance space. Even healthcare and life-sciences industries have utilized this technology to optimize their business processes, prune costs and encourage innovation. Similarly, FinTech platforms enjoy a competitive edge due to cost-effective operations and fewer regulations than the traditional financial sector.

Financial technology startups are emerging as a disruptive force in the banking industry and can draw a parallel between Amazon (it is disrupting the retail industry) and Uber (it is disrupting the transportation sector).

The new financial technology, players have created a paradigm shift in the financial sector through digital innovation. Thus, they are paving the way for more transparent and efficient operations.

Key Drivers of FinTech

The abundant availability of capital through venture funding in financial technology startups, customers’ preference for digital experience, access to right talent, government backing and the quickly developing digital infrastructure are key drivers behind the growth of the FinTech industry.

In addition, the other key drivers for the industry are as below:

Lack of trust in traditional banking, following the 2008 financial crisis motivated the customers to shift to technology platforms

The proliferation of digital technologies such as cloud, social media, analytics, and mobile internet, etc

Customers are more engaged with digital platforms, including mobile devices. Thus, there is a growing demand for better financial products and services

Millennial and Generation-Z are early adopters of digital financial products and services

Moreover, the demographic shift and technology proliferation globally are enabling the rise of FinTech startups

The hype around FinTech is attracting talent away from the traditional financial sector. These tech-savvy talents compete directly with the incumbents in the financial industry

The growth of financial technology startups supported by private investments

Facing increasing regulations and shareholder pressure, banks have found it difficult to develop the necessary risk culture for groundbreaking innovations. Technology-based startups are facing less systemic risks compared to traditional banks and are also exempt from most of these restrictions. Venture and private investors have poured huge investments in FinTech companies. FinTech is one of the fastest growing startup spaces with over 5,000 startups globally. The value of global FinTech investment in 2015 grew by 76% to $22.3 billion