Fintech is one of a few market sectors where growth during the pandemic has accelerated. In fact, the fintech sector is predicted to reach $305 billion in sales by 2025, a 22% CAGR.
We’re excited to work with one fintech leader, Redrock Biometrics, which develops palm-print based technology to enable touchless identification and authentication. This enables applications such as bank tellers to leave their stations with a simple wave of their hand versus the cumbersome logout and login process, or consumers to use ATMs without touching buttons on a machine.
The increased need for secure transactions during COVID-19 and the desire for touchless interaction are two obvious factors driving the rapid growth of fintech companies. There are other factors at play as well.
My first marketing professor at business school made a joke that when sitting in a client meeting, if you’re asked something and at a loss for an answer, just say, “focus.” But fintech entrepreneurs have taken this to heart.
Unlike banks, many have been successful because they focus on solving one problem and concentrate their energy and time to both address the problem but create a more positive customer experience in the process. In addition, they are unimpeded by the older computer networks most banks run. Not only are these systems slow and inflexible, banks often have difficulty finding coders who can keep these systems running. Lastly, unbound by traditional thinking, fintech entrepreneurs can apply new technologies, such as blockchain and AI/ML in new and innovative ways, such as addressing fraud prevention, customer support, and risk mitigation.
Mistrust of Money Center Banks
Large banks have been fined more than $30 billion since 2008 for misdeeds such as non-compliance with anti-money laundering regulations and opening false accounts. Fintech startups are creating tools that build on what banks have traditionally offered and have the potential to restore the trust eroded since the financial crisis.
Serving the Underserved
To please their shareholders, larger banks focus on high-margin businesses, such as commercial lending, at the expense of lower-margin activities, such as retail banking. Even within commercial banking, large corporations receive much greater attention than less profitable SMBs. Fintech companies have sought to fill the void. With new technology and new approaches to solving traditional problems, many fintech companies are making money where commercial and retail banks could not.
Charting the Future Course
In many situations, fintech startups are challenging traditional commercial and retail banks and peeling away parts of their businesses. However, the more logical path to the future is to avoid expensive competition with traditional banks, which while slower and technology-challenged, often have deep pockets.
The wiser course for many fintech startups might be to cooperate with traditional banks and merge their innovative technology and solutions with a bank’s existing infrastructure. This approach lets the fintech gain access to the traditional banks’ commercial and retail customer base and access to those deep pockets to further develop their products.
There’s not much guaranteed in financial services today, but one trend that is sure to continue is customers receiving better service with new solutions than they have received in the past, whether from fintech startups or traditional banks partnering with fintechs.
Are you a fintech in need of forward-thinking narratives? We can help you grow and build your brand.