3 Key Trends in Fintech and What They Mean For Entrepreneurs

Fintech is the application of technology to the financial world. If you’ve cashed a check from your phone or sent money to a friend via Mobile Money, you’ve seen fintech in action. Most of these types of applications build on existing technologies to make financial transactions easier and faster.

But some elements of fintech are starting to use cutting edge technologies such as blockchain and Artificial Intelligence (AI).

The word fintech conjures up an expansive list of agile startups threatening big banks. But it also refers to steps the financial services insiders are taking to stay competitive. And increasingly, the small startups have begun partnering with established industry giants.

In all these permutations, fintech—which can be powered by the most basic technologies such as the Internet and mobile apps, as well as the very advanced like blockchain and AI—has the potential to disrupt and revolutionize financial services. We already see rapid change in who accesses financial services and how they do it.

Business concept. Business people discussing the charts and graphs showing the results of their successful teamwork.

Fintech Trends to Look out for
Today’s challenge is identifying how to harness the changing landscape of fintech to the benefit of your business. Here are three important trends that may help you strategize your next move as you think about how fintech can—and will—impact your organization.

1. Bringing financial services to the unbanked and underbanked
Ultimately, the goal of fintech is to make financial services less expensive and more flexible per transaction. The greatest promise potentially lies in reaching the so-called unbanked and underbanked.

Unbanked individuals lack access to traditional brick-and-mortar banks due to poor or nonexistent infrastructure or government regulation. Underbanked refers to individuals who are not getting the financial services they need, usually because they are insufficiently profitable for traditional banks to serve them.

By pushing the transactional costs of financial services down, and relying entirely on digital access, fintech offers low-cost products and services that cater to these non-bank customers.

Bringing effective financial services to these individuals offers benefits to consumers and businesses alike. FinTechs that can enter this space successfully will reach a wide swath of new customers. But ensuring adequate financial services to unbanked and underbanked populations has the very real potential to have a positive impact on global poverty.

2. Successful innovation requires thinking beyond technology
It’s easy to get hung up on integrating the latest technologies. In fact, most successful FinTechs today aren’t built on cutting edge technology. Instead, they have discovered how to leverage and amplify the advantages of existing technologies.

In other words, specific technologies (i.e. blockchain) are less important than matching the right technology to the current—or future—social change. Successful innovation comes from matching the right technology with the right demand, at the right time.

Thus, the disruption stemming from fintech is as much about social change as it is about technological change. The impact of technology lies in the product or service the technology has actually created and, most importantly, how that product or service is perceived, applied, and absorbed.

3. And successful innovation requires substance, not show
The rapid pace of change in society today—be it social, technological, or both—has created what appears to be an entrepreneur’s paradise, as demonstrated by the proliferation of fintech startups.

With that proliferation comes the competition for customers and capital. In the early days of fintech, startups could attract both by being the first to develop a mobile app, for instance, or even simply creating a smoother or more accessible customer experience than the competitor.

To stand out in the noise today, a successful innovator will increasingly require a clear and demonstrable path to monetization, without relying on sleek interfaces or showy gimmicks.

Investors are now more interested in the feasibility of the business models of various FinTechs than just their technological prowess. Outside the world of finance, many technology firms owe their success to the right business models, coupled with the right processes and operations as well as targeting the right pain points that their customers face. The same logic applies to fintech companies.

What this means for entrepreneurs.
Fintech offers a fascinating case study of a market infused with new technologies and unmet needs.

Titans are being challenged by newcomers. New and old technologies are being developed and adopted. And novel products offer new possibilities and replace outdated solutions.

In short, the fast-evolving fintech markets provide valuable lessons and insight not only to those who are thinking of working or starting a company in this exciting and dynamic industry, but also to those who are considering how to adopt technological change into their business, big or small.

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