What the Fintech Revolution is Really About


I often hear about how slow and ineffective banks are to adapt to the technological world of the internet age. It is true that banks are challenged in the virtual space of the internet. Their systems were built for the 20th century, where trade was focused upon buildings and humans in trading rooms and branches. However, the idea that banks are going to let fintech just steamroll their current operations is just an illusion.

Banks have millions of customers, billions of capital and centuries of history. This is their strength. They have poured billions of dollars into technology over the years, and still do. Admittedly, their systems are often cumbersome and out-of-date, but that is their challenge. How do they overhaul their systems so that they reflect the modern new age of distributing financial services as data through a network of software and servers, rather than as paper through a network of branches and humans?

Meanwhile, the fintech sun is rising and most of its beam is focused upon areas left dark by the incumbent financial institutions. Much of fintech is about banking the unbanked through mobile wallets. The peer-to-peer lenders appear to be more focused upon small businesses and higher credit risk borrowers, rather than the mainstream consumers and smaller, Main Street companies. Robo advisors are offering advice to those who previously received none, and payments companies like Stripe and Square are purely adding an overlay of an app and an API to an existing payments process that is not fit for that purpose.

In other words, fintech is either servicing the unserviced or fixing the fixable, rather than disrupting, destroying or disintermediating banks. In Europe, there are new banks rising: Atom, Solaris, N26, Tide, Tandem, Fidor, Starling, Monzo and more. They are called challenger banks, and mainly for the reason that they are meant to challenge the large existing banks. But they will not. Their focus is upon building niches, as all new banks start with no customers, limited capital and zero history.

Therefore, to throw a little dose of harsh reality onto the fintech fairy tale, the new world of finance on technology is all about adding to the existing financial system. It is not replacing it or disrupting it. It is supplementing it. That is why we have so many bank hackathons, incubators, accelerators and venture capital funds. Banks want fintech to rise. Banks, insurers, regulators and investors recognize that the financial system is only servicing some of the markets, not all. That is why the times we live in are so exciting and why I often underscore the real change our world is seeing with technology. That change is the inclusion of everyone in the network and, by everyone, I mean every one.

A decade ago, the seven billion people on this planet had just two billion with fully functional bank accounts. Today, we are seeing all of the people getting some form of financial inclusion through mobile wallets. Seven billion people can access the financial network today. That is everyone. Just a decade ago, only one in three people could access the network. That is the real transformational moment that fintech is delivering, and that is far, far brighter than the conversation about disrupting, disintermediating or destroying banks.

So please take note: fintech is about a whole new world where everyone can trade and transact in real time for almost nothing one-to-one globally. This is the revolution we are living through and it is a fantastic change from servicing just those worth serving through a physical network with buildings and humans. Serving the world through software and servers to allow trade and commerce to flow like water is the fintech revolution and I love it. I hope you do too.

Chris Skinner