These are the most common misconceptions about the fintech industry (BAC, WFC, JPM, MA, V)
The fintech industry promises to shake up the financial world, but the public might have some misconceptions about just how that will happen.
Fintech is surely disruptive and revolutionary, but is it truly a group of startups threatening to destroy traditional financial institutions as we know them? Not according to Tradestreaming, which has compiled a list of the biggest misconceptions about the fintech industry.
1) Wall Street will not fall because of it.
The public's distrust for Wall Street and legacy financial players has reached unprecedented levels, but don't expect fintech to ride in like a white knight and change all that.
The finance world is losing some jobs and financial apps are growing in popularity, but these apps are nowhere close to a real threat to taking the place of banks in our economy. Instead, the fintech companies are helping legacy players evolve.
2) Banks are not being replaced.
Brick-and-mortar banks are becoming less important, particularly among millennials, but they are far from dead and buried. A recent report from the The Institute of International Finance discovered that compliance and regulatory activities can cost banks $1 billion per year, which means it's far too difficult, expensive, and labor intensive for startups to compete with banks head-to-head.
As a result, fintech companies have decided to compliment banks rather than fight them.
3) Fintech startups are flashy.
The word "startup" conjures images of Silicon Valley, flowing cash, and fame. But fintech startups are anything but sexy, as these companies spend significant time and money to figure out ways to deal with state and federal regulations. Tradestreaming notes that an estimated 10-15% of total human capital costs go toward compliance.
Along with that, they must work tirelessly to bring on new clients, a challenge unto itself.
4) Fintech is not the ultimate equalizer.
Many view fintechs as an equalizer that gives powerful technology to the unbanked and underbanked, which in turn closes opportunity gaps. If everyone has access to cutting-edge financial technology, then the rich and elite wouldn't hold all the cards, right?
That's only true to a degree, as some apps have provided automated tools (such as robo-advisors) for the common man, but these tools typically only go as far the amount of money you pay for them.
Yet even with all these misconceptions, we’ve still entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs.
This change will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:
- Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees
- Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful
- Traditional Asset Managers vs. Robo-Advisors: Robo-advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.
As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.
After months of researching and reporting this important trend, Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has put together an essential report on the fintech ecosystem that explains the new landscape, identifies the ripest areas for disruption, and highlights the some of the most exciting new companies. These new players have the potential to become the next Visa, Paypal or Charles Schwab because they have the potential to transform important areas of the financial services industry like:
- Retail banking
- Lending and Financing
- Payments and Transfers
- Wealth and Asset Management
- Markets and Exchanges
- Insurance
- Blockchain Transactions
If you work in any of these sectors, it’s important for you to understand how the fintech revolution will change your business and possibly even your career. And if you’re employed in any part of the digital economy, you’ll want to know how you can exploit these new technologies to make your employer more efficient, flexible and profitable.
Among the big picture insights you'll get from The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry:
- Why financial technology is so disruptive to financial services—it will soon change the nature of almost every financial activity, from banking to payments to wealth management.
- The basic conflict will be between old firms and new—startups are re-imagining financial services processes from top to bottom, while incumbent financial services firms are trying to keep up with new products of their own.
- Both sides face serious obstacles—traditional banks and financial services firms are investing heavily in innovation, but leveraging their investments is difficult with so much invested in legacy systems and profit centers.
- Meanwhile, startups are struggling to navigate a rapidly-changing regulatory landscape and must scale up quickly with limited resources.
- The blockchain is a wild card that could completely overhaul financial services. Both major banks and startups around the world are exploring the technology behind the blockchain, which stores and records Bitcoin transactions. This technology could lower the cost of many financial activities to near-zero and could wipe away many traditional banking activities completely.
This exclusive report also:
- Explains the main growth drivers of the exploding fintech ecosystem.
- Frames the challenges and opportunities faced by incumbents and startups.
- Breaks down global and regional fintech investments, including which regions are the most significant and which are poised for the highest growth.
- Reveals which two financial services are garnering the most investment, and are therefore likely to be transformed first and fastest by fintech
- Explains why blockchain technology is critically important to banks and startups, and assesses which players stand to gain the most from it.
- Explores the financial sectors facing disruption and breaks them down in terms of investments, vulnerabilities and growth opportunities.
- And much more.
The Fintech Ecosystem Report: Measuring the effects of technology on the entire financial services industry is how you get the full story on the fintech revolution.
To get your copy of this invaluable guide to the fintech revolution, choose one of these options:
- Subscribe to an ALL-ACCESS Membership with BI Intelligence and gain immediate access to this report AND over 100 other expertly researched deep-dive reports, subscriptions to all of our daily newsletters, and much more. >> START A MEMBERSHIP
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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of the fast-moving world of financial technology.