One of the fastest growing sectors of the current tech boom has been FinTech. FinTech includes companies as internet payment giant PayPal, a cloud-based human resources platform called Zenefits, and a consumer credit monitoring and repair service called Credit Karma.
The Disruptive Power of FinTech
There is no doubt that FinTech has the awesome potential to disrupt the way people think of money. Some companies are looking to bring banking type services to the increasingly large number of people who don’t have a bank account, or who want a level of convenience and low fee services that traditional banks have not yet been able to match.
Other FinTech companies are taking aim at financial planners by offering investment services powered solely by algorithms. They offer low fee services that promote their independence from human judgment.
FinTech is often talked about as if it is a monolithic presence. However, just like the larger banking and finance sector, FinTech is actually made up of many different niches. Some FinTech companies market to consumers while others have a business-to-business model.
Why Financial Services Professionals Aren’t Like Travel Agents
Some FinTech companies will undoubtedly grow to become industry giants. The next major tech company on the scale of Amazon or Facebook will likely be a FinTech company. But, there is also a lot of hysteria surrounding FinTech. Many people point to how travel sites destroyed travel agents when pointing to how FinTech may impact the financial services industry.
But, financial service professionals are not travel agents. Financial service professionals work in a highly-regulated industry. No matter how sophisticated some FinTech companies become, they will still be locked out of offering many services by state and federal regulations.
For example, a FinTech company cannot just decide to become a bank. They would have to meet the same chartering requirements as every other bank.
Additionally, no matter how sophisticated an algorithm gets, it will not replace the need many people have to discuss their financial wants, needs, and goals with an experienced expert. You will still need a human who understands finance to guide you down the right path for you.
Potential Partnerships Between FinTech and Financial Services
The future of FinTech and financial services are actually bound tightly together. Consumers and businesses will both benefit from the efficiencies technology brings to the financial services sector. FinTech companies will likely find the most profitable paths forward are to partner with traditional financial services companies.
Financial services companies already have the trust of millions of clients and the infrastructure to serve those clients. Partnerships between FinTech companies and financial service firms will not only benefit the companies involved, but also the consumers. Clients will get better quality services, a wider array of service offerings, greater convenience, and cheaper services.
FinTech will be a force for change in the global economy. However, unlike previous internet-based disruptions, FinTech will succeed through partnerships with traditional companies, not by replacing them.