The financial services industry has been traditionally conservative to the adoption of new technology especially in terms of disruptive technologies. During the past few years, this is rapidly changing as a result of the emergence of financial technology (FinTech) which is transforming financial organizations. The term “FinTech” stems from the mix of “financial services” and “information technology” and has been around for nearly three decades. However, its wider adoption and use date back in 2013-2014 when the industry started associating FinTech not only with the use of state-of-the-art technologies in the financial sector but rather with service disruption and novel business models as well. FinTech has nowadays a bright future: Thousands of FinTech startups are trying to develop and roll out innovative products and services for banks and other financial institutions while most financial organizations are aggressively investing in FinTech. According to a recent McKinsey & Co study, the number of FinTech startups in 2016 exceeded 2000 in comparison to approx 800 in 2015. Moreover, the vast majority of global banks and investment firms have already planned to increase their FinTech investments aiming at a 20% average return on their investments. In this context, it’s really important to understand what drives FinTech growth and also the different types of applications that comprise the FinTech landscape.
The surge of interest and the rising investments in FinTech are driven by the following factors:
The last point of the previous list is probably the most important driver of the FinTech revolution. With financial technologies banks and other financial organizations are not marginally improving their existing services rather; they can do things differently as part of their digital transformation. This changes the nature of banking through disruptive changes in their culture, digital infrastructures, and business models. In particular:
FinTech’s disruptive power is already exploited in a number of different applications which cover virtually the entire financial sector. The most prominent FinTech applications can be classified into the following categories:
Each of the above categories comprises many other subcategories, which are constantly growing in size and scope, given the proliferation of FinTech ideas and startups.
With over $23 billion of venture capital and growth equity during 2011-2014 and $12.2 billion of investments in 2014 alone, FinTech represents the future of financial services. We hope that this post serves as a valuable assistant in understanding the emerging FinTech landscape.
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