Fintech threatens to bury established banking models. The question is where will it happen first, and when.
Barriers to entry in banking, as in other parts of the financial sector, used to be formidable. Survival, let alone success, typically depended on access to capital, brand and scale of operations. Pedigree almost counted as much as performance.
Not anymore. Financial technologies (‘fintech’), or rather the companies can master them, are shaking up the entire sector. They are threatening to bury established banking models and re-define how financial systems operate in ways that will force many established players to adapt or die.
Disruptive technologies are at work from blockchains to cryptocurrencies, peer-to-peer lending and machine learning. The effect is to simplify, automate and intensify functions once carried out at a statelier pace and generally higher cost.
The advance of ‘fintech’ has not carried all before it: there have been failures along the way as well as successes. But the financial sector is so huge and its operations so complex that emerging technologies firms are finding it an irresistible target. In the next five years, banks probably will have shifted towards providing a utility-like infrastructure to fintech companies, which will engage directly with the customer.
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- New names and old names: Picking ‘winners’ in the new game of global finance.