We find ourselves in the age of a new revolution, the fintech area is gathering more and more startups.
Offering tech-enabled payments, currency exchange, crowd funding, online lending and wealth management services, we find the overwhelming variety of projects. Asia has 2500 startups while the USA and UK have a combined figure of 4000 projects. The numbers are estimates and probably do not come close to the true count.
What gives credibility to this rise you may ask. The increasing amount of global investments in this area since 2010 has been $24 billion, out of which $11 billion in the first three quarters of 2015. The success stories list is on the way up.
Fintech started growing based on the changes in bank policies after the 2008 crisis. The change in views meant the main objective was focusing on back-offices rather than front office operations keeping in close sight a better risk management.
“Fintech is different from many other startup sectors because the financial world is heavily regulated and mostly consists of a relatively few number of large, well-established firms.”
Houman Shadab, law professor at New York Law School
Houman Shadab has a very valid point of view regarding this startup sector. Given the heavy regulations in the financing areas, the fintech founders find themselves to be about a decade more experienced than their counterparts in other domains in order to fully understand and cope with the existing laws.
The regulations are also one of the down-sides of fintech. The fees and struggle to start such a startup can overwhelm many founders. Expansion is also a problem when emerging into a market filled with well-established firms, making it even harder for fintech startups to overcome the obstacles.
Another major issue that comes in the path of early startups is the reality of cyber security. It might come hard for a project in it’s early stages to provide the level of security that banks have in hand after years of operations.
The fact is banks will not disappear anytime soon. Whatever the disrupt created by fintech will be, in the end they can be a strategic partner ready to enable the fintech startup the success needed.