You may have heard about it because it’s everywhere right now, but ‘FinTech’ is more than the hype that precedes it. A portmanteau of financial technology, FinTech is an emerging financial services industry that first gained traction in 2007.
Originally, FinTech was anything that had to do with disrupting the status quo of financial institutions-namely banks. It has now expanded to encompass innovations in social good, financial literacy, investment, accountancy and more. From Kickstarter and Lending Club to Xero and PledgeMe, FinTech startups are finding success overseas and in New Zealand alike. Our movement is just starting though, it’s a $1 Trillion opportunity, so watch this space. Yes, a movement.
While FinTech involves finance, like any worthwhile movement, it’s challenging established traditions. Until a several years ago, if you wanted a loan, you had to go to your bank. The banks had to work under the laws of the global markets to make the decision whether or not to give you the money you needed. But with innovative technologies and startups essentially forcing our financial services industry to improve, financial decisions are being democratised.
This new world of financial technology is revolutionary. Investors all over the world are pouring money into FinTech startups, and they’re doing it because they believe it will transform the world. So, how will they do this? FinTech allows us to manage our money faster, smarter and cheaper. Depending on your background, that might not sound like a big deal, but it means a lot to small businesses looking to cut down on crippling bank fees and to the masses of people, particularly the working class and poor, who have never had access to financial services period. FinTech offers basic financial services to lower-income families who pay more for these services than the rich. It’s breaking down barriers to access, and that’s a movement worth backing.
Blame millennials, or rather thank them for this new FinTech movement that sprung up out of their demand for new, more flexible financial products. As consumers, millennials have a low tolerance for the middle-men. Millennial-driven companies such as Uber, Airbnb and Kickstarter have disrupted their sectors and are leaving traditional gatekeepers in their wake as they reap profit and reward.
According to a recent report from one of our sponsors, EY, consumers are attracted to FinTech because of the better rates they offer compared to traditional lenders. This ease of access to different products and services combined with a better user experience online are further drivers. In fact, simplicity of use is generally the most attractive feature when engaging with FinTech startups, according to EY.
You do. Take a look at your wallet. Do you have EFTPOS? Apple or Android Pay? Do you use Uber, Airbnb, or Pokémon Go? If you’ve answered yes to any of these, you’re exactly who the FinTech industry is targeting: consumers. Yes, FinTech products benefit banks, retail, and insurance companies, but FinTech exists to make life easier for people. FinTech companies ease payment processes, reduce fraud, save users money, promote financial literacy, and ultimately move an industry that was once very set in its ways, into the future. Which is precisely why Kiwibank is proudly backing the FinTech accelerator programme. You might be thinking, why would a bank want to support an industry that’s out to change the face of financial services?
Well, a recent Goldman Sachs analysis has predicted that banks stand to lose 100% of the student, consumer and mortgage loan business to marketplace lenders over the next five years. We think we can stop that from happening to us as we share many of the same values with the FinTech sector. When Kiwibank was created in 2002, we disrupted traditional banking in New Zealand. It's up for the challenge again - New Zealand is three to four years behind the FinTech movement in the United States. Kiwibank is going to help change that.