Posted on 11th May, 2017

by Pete Field

FinTech is taking over the world

Advancements in the FinTech industry are driving change across the whole financial services landscape. The technical ‘innovations’ made by banks to date have been largely iterative. Yes, the introduction of cash machines and Internet banking hugely improved customers’ access to money and banking services, but banks are yet to exploit technology to provide truly new or disruptive services for their users. It often still takes several days for payments to be processed - and access to banking isn’t truly 24/7, reflecting the inherent batch processing nature of traditional banks.

The problem for the traditional banking sector is their intrinsic operational complexity, legacy of their systems and the reams of regulatory red tape to be overcome before any changes can be implemented. Rapid innovation is difficult.

But, things are set to change - banking services are opening up. Fuelled largely by PSD2, the directive to create safer and more innovative online payments across Europe, challengers from outside the banking industry are set to gain access, in real-time, to the information previously closely guarded by the banks. These newcomers will be able to create new and innovative applications using customers’ banking information. Good customer service and customer experience will become key to the success of financial services companies. Traditionally, banks have been able to rely on industry barriers to entry to protect their market share but this advantage will be blown away by the reforms.

Look closely and you’ll see the revolution has already begun.

The emergence of the Peer to Peer (P2P) lending industry is one example. Companies such as Zopa and Funding Circle allow individuals to lend and borrow money without the banks being involved. The cloud now allows small innovative companies to stand up hugely scalable, reliable and secure FinTech applications without the need for massive capital outlay. Advances in machine learning as a service, enables complex decision making algorithms to be created effortlessly. P2SD and the rise of block-chain as a reliable transaction ledger empowers tech companies to build new and innovative applications.

The coming together of these services and technologies means there will be a Cambrian explosion of new FinTech services and ideas. Customers will be empowered to maximise the control they have over their own money and the ways they can make it work for them.

Democratisation is coming. Traditional banks must see the opportunities, embrace this new wave and actively work with the new FinTech service providers or risk being left behind, for good.


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