The general consensus within financial circles is that the sector is undergoing a transformational phase as part of the digital revolution and FinTech startups have the capacity to pose a credible threat to the traditional banking model.
A powerful combination of technology and the sort of flexibility of movement that banks don’t enjoy because of their size mean that market share is being torn away from established pillars of banking.
Here is an overview of recent FinTech innovations that have more than rippled the calm waters once enjoyed by traditional banks, before their dominance was challenged.
Fueling the growth in e-commerce
The traditional retail model has also been highly disrupted by the movement to an online arena that consumers have embraced willingly.
Paying for goods online is now very much part of an established culture and this is an area of commerce where FinTech startups have taken advantage by providing payment solutions that are fit for the modern era.
You only have to look at the stellar growth enjoyed by the online payment provider Alipay, which has gone from zero to a third share of the Chinese e-commerce market in a short space of time, to appreciate the potential of FinTech innovators.
Cutting out the traditional banks
Another key area of innovation where FinTech has made a substantial difference is the growth of peer to peer lenders (P2P).
P2P is an innovation that has seen a number of FinTech operators flourish and by providing a platform that enables individuals to lend to each other without any bank involvement a number of providers have enjoyed tremendous growth.
The fact that traditional banks are now looking at ways to transform their practices in order to incorporate an option to act as a business platform themselves, tells you how much the startups have hurt banks in taking a valuable source of lending business away from them.
What we are also seeing is a collaborative approach where banks are proposing mergers with some of these startups so that they can offer some support and guidance while both benefitting from FinTech innovation at the same time.
A new way for employees to access a short-term loan
There are plenty of fine examples of FinTech innovations being put into practice and one example of this would be a UK startup called Hastee.
The app they have created provides employees with flexible access to up to half of their earned pay if they need it early. The amount borrowed is paid back when they get their salary at the end of the month and the credit risk is borne by Hastee rather than the employer.
This flexible approach doesn’t impact on the employee’s credit score offers a viable payment solution that doesn’t expose borrowers to high-rate loans if they have to apply for a short-term loan in the traditional way.
When you look at this and plenty of other examples of FinTech innovation at work it is fair to question whether an era of banking dominance is at an end.
