Fintech is an economic industry composed of companies that use technology to make financial services more efficient. A recent CB Insights study highlighted some interesting numbers about the “Fintech boom” that industry experts and journalists have been discussing over the past year or so.
CBI found that a large source of Fintech growth has come from banks not only increasing adoption of non-proprietary technology internally, but also increasing the frequency and size of investments in outside tech firms.
The numbers are stark: Fintech has seen an increase from $3.1 billion invested over 560 investments in 2013 to more than $14.4 billion over 775 investments in 2015.
This dramatic increase in investor appetite coincides with a strategic shift in the way that banks view and interact with Fintech. After decades of increasing barriers to entry for non-proprietary technology, financial institutions have begun to lower their drawbridges and engage the Fintech community in a more collaborative way.
Ever since Ebay’s 2002 acquisition of PayPal for $1.5 billion, payments have remained the single largest sector within Fintech; even as late as 2008 they were responsible for 70% of all Fintech investments. However, in recent years the industry has diversified considerably, with startups running the gamut from crowdsourcing alternative investments to reinventing back-office record keeping via the blockchain. As Fintech companies started to focus on areas that were core to the traditional banking business model, banks began to see the value in engaging the Fintech community more directly.
Rather than ignoring the traction that these startups have found (particularly among millennials), financial institutions have come to respect it.
Rather than sitting back and waiting to see what comes to market, I’d encourage advisers to become active participants in the Fintech conversation. You can be part of the next generation of Fintech to better address both you and your clients’ needs. Advisors who join in the collaboration with Fintech have a strategic advantage over their lagging peers as they’re better equipped to identify early trends and adopt innovative products.
Advisors have the opportunity to outpace the banks when it comes to Fintech adoption and collaboration. After all, adaptability is a fundamental skill for any advisor. Markets are volatile, financial plans inevitably require adjustment, and client’s tastes will change. While the banks have taken an important first step towards a more collaborative future, advisors can be nimbler than the banking establishment.
Source:
Lowell Putnam
InvestmentNews
