FinTech UK 2014-2020

FinTech UK 2014-2020

Mar 08, 2016
Fintech is Threatening the Financial Status Quo
Luisa Sykes Luisa Sykes

Banks and other financial institutions are changing their operating models after decades of rigid business practices and neglecting their customer base. The fintech disruption has shaken up the traditional financial industry and driving change. Can these organizations claw back lost power? Can they stop the fintech revolution? This is very unlikely for a number of reasons.

First, the size and bureaucratic structure of the big financial institutions slows down the process of embracing innovation and more importantly the implementation of innovative ideas and processes. It is not even the technology itself that causes resistances but the changes in practices and processes within large organizations - these organizations lack the agility to transform and innovate. Changes require consent and obtaining the necessary agreements throughout the organization takes a long time and a lot of effort.

Second, the risk aversion factor prevents financial organizations from taking chances and going outside the well tested procedures and practices. The low tolerance to risk and low tolerance to failure blocks the innovation process which is greatly based on trial and error. Small entrepreneurs test ideas by discarding and moving fast to new models or instead validate and adopt with equal speed. Financial organizations cannot dispose of their resources in the same way and the validation and adoption process to absorb change can turn into a very convoluted process.

Everything considered, financial institutions cannot afford to miss out on the global digitalization trend and many are now trying to catch up by investing in fintech companies. The old business models are under threat of becoming obsolete and it becomes clear companies need to become more agile and more customer oriented too.

New business models led by start-ups are disrupting the old establishment – peer-to-peer platforms, low cost online-banks, bespoke portfolio management - to name just a few - are disrupting the traditional economy. The fintech industry is expanding rapidly with China, United States and United Kingdom top of the table in term of total transaction value. In the UK alone, estimates by Statista indicate fintech transaction value will experienced an average growth of 15% in  the next 4 years - a great percentage (over 60%) is being attributed to digital payments.

  • VIA
  • Luisa Sykes