I finished my last post with the closing line, ‘Fintech disruption is dead. Long live fintech’. I want to try to go further with this.
The fintech wave has begun its phase of consolidation, and many doubtful voices question the sustainability of fintech startup business models. This may seem to superficial eyes as a potential setback – let’s call it a flop. For sure, some VCs will have their own troubles, as many startups will fail, but this is part of their risky business. I believe instead that this new phase should be seen as the initial “creative disruption” moment. This is turning into the beginning of fintech integration, which simply requires more time to produce its long-term effect. Let me explain …
There is a reason why there isn’t (yet) a global Facebook or WhatsApp or Uber or even Amazon of banking. This is an over-regulated industry, playing with people’s money and savings – not photos or videos – with a very pervasive global infrastructure. This industry represents the backbone of the global economy, as it holds the ongoing secure rails of global flow of money; rails that are key to further expand the globalisation of the economy; rails that you can’t replace overnight, but that have been built about 50 years ago and certainly need serious renovation.
If something is so deeply rooted, it takes time to evolve and renovate, and here is where fintech comes to help. Fintech solutions aren’t coming out of the blue – they are nothing but a new, stronger phase of change after the mass ‘electronification’ of the industry in the 70s and 80s, and the arrival of internet banking and ecommerce payments across the two centuries. The digital phase.
Fintech is the new evolution, and the answer to the digitisation of the economy, fast-forwarded by its growing globalisation at the speed of data (now faster than money). As such, it will dramatically change the way financial services are designed and delivered to customers, including the back-end. The pace and size of its impact will depend on how well we, the financial industry and the fintech firms, will integrate these new solutions into the mainstream; how well we accelerate fintech innovation and scale up its adoption to the masses and mainstream infrastructure.
Fintech and banks can be seen as ‘frenemies’ for the time being: some competing, some collaborating. Business models are changing, and right now both the (historical) universal banking model and the (initial challenger) vertical fintech startups model don’t necessarily look in great shape. Yet, if you have a slightly longer-term view, you’ll see that they belong to the same pathway as the new, digitally reshaped financial services of the century.
It takes time to unbundle, rebuild and renovate the whole industry. Yet, rest assured that this industry is having its digital (r)evolution.
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Roberto’s new book is available on Amazon. Main image: Lightspring, Shutterstock.com