The financial technology space, or fintech as it’s more commonly known, is burgeoning with no signs of slowing. Since some of the early innovators, like PayPal and Square that introduced new ways of paying for goods and services, fintech has evolved into other areas like advisory services, lending, and wealth management, to name a few. And much of this innovation is being led by one thing: creating a better customer experience.
In their recent webinar, “How to Thrive in the Fintech Revolution,” Scott Williams, director of software development, and Raphael Hyde, product designer at Tallwave, explore how fintechs are disrupting the industry, the advantages and disadvantages of this emerging technology, and where the industry is headed.
What is fintech?
Fintech (financial technology) generally refers to emerging ventures applying technology to solve a problem in the financial industry. Familiar examples include companies like Square, PayPal, and Stripe, which have changed the way we process payments. Some of today’s most relevant fintechs include Dwolla, Fidor Bank, Wealthfront, Betterment, and even peer-to-peer lending sites, to name a few.
What kickstarted the rise of fintech?
Technology has changed the way consumers do things and many of the legacy systems behind the financial services industry have failed to adapt to the evolving customer need. Things like automation, personalization, availability of self-education, and peer-to-peer transactions have all coalesced to bring about innovation in this space.
How are APIs shaping the financial services industry?
Application programming interfaces (APIs) are enabling different players in the fintech ecosystem to collaborate with one another and with traditional financial institutions. Today’s most successful fintechs are offering greater integration of the services in the areas of payments, lending, robo-advisory, and trade data management.
“Now that we’re able to learn from our customers and how they interact with other products and services, products can become more contextual and personal to each user,” Raphael said.
“With fintech in particular, I think we’re going to see a lot of disruption with APIs,” Scott said. “Because if big, traditional financial institutions don’t have good APIs that allow external use, they’re going to get taken over by the startups that do.”
“A great anecdote, is related to Amazon. When they were relatively early, Jeff Bezos put out an executive mandate saying that every group or service within Amazon has to have some sort of external service that other teams can use to communicate with, and it had to go through this API, and these all have to be built with the expectation of being externalized so people outside could communicate with those services,” Scott said. “That allowed them to build AWS (Amazon Web Services). AWS has become a gigantic tent pole in terms of Amazon’s revenue and operations. I think there’s an opportunity for someone to have AWS in the fintech community. There’s no reason that can’t happen.”
What do you think is next for fintech?
“Age of truth and collaboration, we’ll soon be more willing to pool investments with strangers, and entertain new forms of securities such as selling a portion of your home or participate in large investments with multiple buyers, this wasn’t legal before, but those days are soon fading away,” Raphael said.
As Scott mentioned, one area that presents a tremendous opportunity for fintech ventures is this idea AWS for fintech. Just as Amazon created the foundation for which much of the internet operates from, an AWS for fintech could serve a similar purpose.