If you’ve heard a lot about fintech but you aren’t completely sure what it’s all about, don’t fret. You are not alone.
Technically, fintech is simply the combination of financial services and technology. But fintech companies are doing so much more than simply adopting technology for the finance industry. They’re finding unique and innovative ways to take advantage of emerging technologies, such as big data, analytics and mobile, to disrupt the existing financial service offerings and change the way we think about personal finance.
We use our smartphones to work, track our health, and maintain our social lives, so it’s really no surprise that we’re starting to use these devices to manage our money.
What are fintechs doing differently than traditional financial institutions?
These new startups aren’t necessarily offering new services, but rather offering services in a new way. They’re making it easier for younger customers to find financial products or services, and giving them a way to connect through the devices and technology to which they’ve become accustomed.
What areas of finance are being impacted?
In short, all of them. Lending, insurance, investing, banking, and money transfers are all being impacted by new fintech startups. We now have robo-advisors automating the investment process, peer-to-peer lending platforms make taking out a loan as simple as completing an online form, and you can even send cash to your friends through online chat. The possibilities are seemingly endless.
Barriers and challenges faced by fintechs
While it may feel like fintechs are primed to take over the Canadian marketplace, the reality is their impact has been much more muted. Fintechs are being embraced at a slower rate in Canada, with only 18% of Canadians using two or more fintech services, compared to an average adoption rate of 33% across 20 international markets.
The biggest challenge they face is gaining recognition and earning trust with the public, compared to well-established institutions and professionals who already have strong relationships and reputations. In Canada, that’s especially difficult, as they’re competing with the brand recognition (and budgets) of a handful of big banks and financial services companies.
Are fintechs just a fad? What’s the trend?
Although the early prediction of a complete disruption to the Canadian financial services industry has not come to fruition, a new trend has evolved. Canada’s banking and finance industries are developing partnerships with fresh-faced fintech startups as a way to better serve their customers. While fintechs are more agile and willing to work with new technologies, existing financial companies have the capital and client base to make those new products and services grow rapidly.
A chance for growth
While these startups are novel and innovative, fintech’s reliance on a digital customer interface lacks the personal connection that comes from a financial services professional. There’s still a need for human interaction. You may have the opportunity to adopt new technologies into your practice to increase your productivity, connect with previously underserved clients, or gain new business.
The first thing you can do is to be aware of these new technologies. Become a resource for your clients, educate them on the potential benefits and pitfalls with these offerings. By embracing change and learning to make the most of this new technology, you may be better able to serve your clients.