The first big trend observed at the conference was a willingness for companies old and new to collaborate with each more. It’s a shift that’s been slowly happening for awhile, marked by traditional banks and financial mainstays warming up to and partnering with startups and more establiished FinTech players. A major example of this was found in PayPal’s announcement that they had formed 11 partnerships with various companies in just the past year, including Visa, Mastercard, Discover, and Citi.
Speaking of Citi, the companies head of treasury and trade solutions, Gulru Gundem, said during a Mobile World Congress session that FinTech disruption had led Citi to be more open to innovation. Additionally he noted that the FinTech revolution will continue to spread within corporate products as Millennials will demand solutions that are as innovative as the ones they use in the personal lives. This once again leaves the door open to even more potential partnerships going forward.
Although partnerships are growing in popularity there are still a number of battle grounds. One of the biggest is traditional banks versus online-only banks. With traditional banks offering almost zero percent savings accounts and often times charging for checking accounts, it has created an opportunity for online only banks to gain new customers by offering higher interest rates on savings accounts along with no cost checking.
Another area where FinTech is making inroads against traditional financial institutions is business loans. After the market crash of 2008, banks severely cut back on the number of small business loans issued. Since then a number of peer to peer lenders stepped into to fill the void in the marketplace. Initially the focus was on small business growth loans but some of the newer peer to peer lenders are expanding beyond that. One of the more innovative companies is Able Lending, which in addition to business growth loans also offers startup loans and debt refinancing.
In all these examples, FinTech startups have shown old-fashioned institutions how their services can be provided more efficiently, more transparently, and for less money. As a result, in addition to the aforementioned partnerships that are starting to form, we are also seeing some older players take a page from these startups and marrying it with their current services. For example larger asset management companies have begun building their own robo-advisor products, which may help them reach a new demographic without giving up their current base.
With that, it seems that, even though some trends within the FinTech industry are becoming clear, there’s hardly a consensus about how companies will react going forward. While some businesses may choose to partner with or perhaps even try to acquire startups that can compliment their current services, others may try to beat FinTech firms at their own game by building similar platforms in house. Either way there’s no question that financial technologies are continuing to change the way we spend, save, and invest our money.