For decades, traditional banks have helped finance a range of disruptive technologies and businesses, from Skype to Amazon to solar panels. Yet, despite making few improvements to their own business models, these banks have largely avoided disruption themselves. Paul Volcker, former Federal Reserve Chairman, wrote:
What Is Fintech — and Why Does It Matter?
Fintech is an umbrella term that describes a wide range of financial technologies that exist outside of the conventional banking ecosystem. Some of the more prominent examples include:
Crowdfunding and crowdsourcing
Mobile and online payments
Peer-to-peer (P2P) transfers
Microloans and microcredit
A common feature among these newer financial services is that banks are no longer required as intermediaries.
Understanding Fintech’s Growing Importance
With growth like this, fintech is obviously more than just a fad. These emerging services are quickly becoming the new normal for the financial sector. By 2025, an estimated 30 percent of banking positions will disappear as a result of these disruptive technologies.
To stay competitive and create “stickiness” for their clients, banks will need to offer innovative fintech products and services that differentiate them from other banks, as well as non-bank competitors. The rise of fintech represents potential opportunities for banks, their commercial account clients, and their customers.