What is FinTech?

August 9th, 2018

Starting with the Basics

“FinTech,” the portmanteau of financial technology, is often used as short hand for new participants providing internet-based, application-oriented financial services. However, focusing only on start-ups ignores that legacy financial institutions are dramatically transforming how they bring products and services to market – in an effort to be more nimble and responsive to customer demands.

So then, what exactly does a typical FinTech look like?

Typical is hard to define, and the landscape might look different a year from now as FinTech evolves.

I would define the FinTech players as:

  • Large, well-established financial institutions, such as First National Bank of Omaha, Mutual of Omaha or TD Ameritrade.
  • Infrastructure companies that provide technology or facilitate financial services transactions, such as ACI, First Data or MasterCard.
  • Big tech companies that have carved out a unique relationship with their users and are currently or could easily extend into financial services. For example, Apple, Google and Facebook.
  • Younger, fast-moving companies like Plaid, D3 Banking or Prosper.

Though FinTech has been around since the advent of ATMs, it’s no secret that the technology has been booming lately. And it’s going to continue to grow. Rapidly.

While legacy firms are working hard to keep up, they are not innovating fast enough, opening up opportunity for fast-moving companies that focus on one product or service. Usually, these start-ups focus on disintermediating the most profitable activities of the legacy financial services providers, like mortgage, savings, transfers and payments. 

This means it’s important for all companies, large or small, whether in the financial industry or not, to think about their growth. The need is greater than ever to invest in new customer-facing technologies. In order to compete, and even
to survive.

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