The rise of financial technology — FinTech, for short — is changing the way people and companies save, pay, borrow, and invest. New competitors often offer low-cost solutions that are simple to access and easy to use. In the process, they’re upending the status quo.
The FinTech formula for success is simple: use technology and mobile platforms to slash costs and bypass intermediaries. The environment includes tech companies, infrastructure players, and startups, along with incumbents. In 2016, incumbents moved away from acquisitions and started to look instead at partnerships with startups. We’ve also seen firms creating proof of concepts and/or working with consortia to enhance operations and improve efficiency.
FinTech and InsurTech to bring the next wave of innovation
In 2017, we expect the footprint of FinTech and InsurTech to continue to expand in many areas including asset and wealth management, capital markets, digital cash, treasury functions, and insurance. We also expect to see growth in digital identity and regulatory technology (RegTech). RegTech typically describes the use of emerging technologies by regulators to help them manage systemic and other risks.
New technology offerings are becoming more integrated into the operating models of many financial institutions. This is being driven by a growing emphasis on application programming interfaces (APIs). More firms are using APIs to let third parties develop apps and tools that can offer customers entirely new services. Of course, cybersecurity will be a concern, too.
Innovation doesn’t just happen. Companies willing to be innovative should create a kind of digital “sandbox” to experiment with new ideas and to test out partnerships with other organisations. They need to be ready to fail fast, bring on new partners to work with their platform and data, and learn from their mistakes. And when they decide they’re onto something good, work quickly to bring the idea back to the broader organisation.