The Tech/IT sector loves buzzwords. Business Process Engineering, Client Relationship Management, Knowledge Management and Cloud just to mention a few.
All of them were
- essentially good ideas/concepts
- not completely new when they developed
- finally stretched too far beyond their original purpose
Now there is a new kid in town: Fintech.
According to Wikipedia Fintech refers to new solutions which demonstrate an incremental or radical / disruptive innovation development of applications, processes, products or business models in the financial services industry.
To use my own words from another post a Fintech is defined by the following key characteristics:
- The client communication happens via modern devices (connected to the internet) only, instead of personal contact and advice (there are no “bricks and mortar” branches).
- Use of cutting-edge technology. Additionally the Fintech was usually able to start on a “greenfield” with no legacy systems to integrate.
- The processes are fully automated (straight through processing). The business model is therefore limited to certain products and services (which can be fully automated) but also easily scalable.
- Finally and most importantly it is disruptive to existing players in the market. That means the Fintech will take away market shares through better pricing (enabled through the points above) and ease of use.
Again the idea is not completely new (let’s think for instance about the online brokers which sprang up in the .com area) but Fintech was rightly gaining significant momentum in 2015 and will most presumably continue to do so.
But unfortunately again it is stretched far beyond its original idea. As Fintech is currently trendy an hip and therefore also valuable by any means, almost everyone in Finance and IT claims to be a Fintech now.
Therefore I suggest to use the criteria of
Gain in market share in a financial product or service through the usage of technology
to distinguish Fintechs from software companies, service providers, bricks and mortar banks etc.
What do you think?