Visual Capitalist
The market for fintech, or financial technology software, was one of the hottest sectors in 2015.
The time is ripe for financial innovation: new technologies are helping end users skip past gatekeepers and intermediaries to customize their use of financial products. Meanwhile, many of the same technologies are also erasing the inefficiencies of banks and other financial institutions to cut costs in ways the industry never deemed possible. Lastly, innovations such as the blockchainare changing the way banks approach their most basic mechanisms – as a result, even the most fundamental practices in banking are evolving.
Payments, personal finance, P2P lending, insurance, digital banking, equity crowdfunding, smart contracts, and digital currencies are just some of the areas that are of interest in the fintech landscape.
There’s heavy competition in the fintech space and no shortage of moving parts. However, this infographic from DealSunny helps to put most things in perspective.
(Note: we did notice a lack of information on blockchain tech here, but otherwise it is a good introduction.)
How will incumbents in the financial realm react to the fintech revolution? That is one of the more interesting questions that is arising now.
Close to a year ago, it was clear that many financial executives were unaware of key fintech startups. However, this appears to be changing fast as fintech companies pose more of a threat.
Incumbents have two options: (1) they can compete by developing proprietary technology or working closely with fintech startups that know what they are doing, and (2) they can buy the fintech companies that are leading the race to scale.
We are already seeing companies like Visa and Mastercard diving head first into the P2P paymentsbusiness. The infrastructure they are using is clearXchange, a network jointly developed by Bank of America, Capital One, JPMorgan Chase, US Bank, and Wells Fargo. As another example, the big banks are also trying to fight robo-advisors by boosting their online wealth management offerings.
However, if fintech companies end up eating the lunch of staid financial institutions – these incumbents will be forced to pay a heavy price. A robo-advisor like Wealthfront already has $2 billion of assets under management, and it won’t be long before the acquisition cost of such a company could literally break the bank.
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