Finweek Collective Insight: Have the fintech game changers truly arrived?

History does not repeat itself, but it does rhyme. One of the latest buzzwords to appear in finance is “fintech”, reminding one of the internet revolution of the late 1990s. During this time there were wild predictions of total change to the fabric of the economy which would lead to the demise of bricks and mortar.

However, the reality was much different and despite a massive impact, it only disrupted a  few niche areas. The outcome was traditional business embracing technology to more effectively execute their business operations.

Fintech is an all-encompassing definition for businesses that utilise software and technology in general to provide some sort of financial service. These financial services tend to be very niche focused and not an all-encompassing offering such as you would get at a bank or insurance company.

An example would be the payment apps you might see at your local coffee shop, which are effectively still leveraging off the banking infrastructure. Other fintech start-ups such as peer-to-peer lending or crowd funding compete more directly with traditional finance firms.

These fintech companies’ offerings are not revolutionary per se, just a different vehicle to channel existing solutions. One of the reasons why traditional finance firms are not as fast to market is their tendency to operate strictly within regulation, whereas many fintech companies are flouting regulations, arguing that it is outdated, or skating very near to the edge where established institutions fear to tread.

Once there is regulatory certainty, traditional firms will tend to roll out similar offerings either developed in-house or through buying out some of the fintech firms.

Read the full article in the 28 January 2016 issue of finweek.

By Claire Rentzke, Head of Manager Research, 27four Investment Managers.