Three Reasons Fintech is Failing

  1.  There is a fundamental strategic contradiction between finance and tech.                                                                                                                                                                    Tech is a high paced sector whereas finance is historically a slow moving sector.  Investors who are funding Fintech companies are expecting to realize returns within 3 to five years.  This puts pressure on the companies to think short-term.
  2.  Market realities encourage short-term thinking.                                                                                                                                                                                                                    The mentality of the industry has become to grow at all costs and companies are using investment dollars for quick growth rather than innovation. The increase in competition is forcing companies to make riskier and riskier decisions.  For an online lending company this means less desirable loans.
  3.  Incumbents in the market are powerful and resistant to change.                                                                                                                                                                                     Incumbents in the Financial industry do not like change.  On top of that, working with the incumbents of the industry means engaging in deals that develop slowly just like the industry.

 

I believe that the Fintech industry is not failing and will continue to grow.  As technology begins to grow, industries are beginning to become more and more interconnected.  Investments in Fintech have jumped from $3 billion to $40 billion in the last couple of years and will continue to grow.

http://www.forbes.com/sites/chrismyers/2017/02/07/3-reasons-why-fintech-is-failing/#65978c477b6b

 

 

 

 

One thought on “Three Reasons Fintech is Failing”

  1. I also do not feel that fintech is failing, but instead is in a place where it will continue to grow and spread in influence. With respect to the first point, I think the contradiction brought up about the paces of the two sectors being different is not actually an issue. If anything, tech may be able to help boost the speed of the fiance sector and change how the status quo works. The second point about short term thinking being encouraged over true innovation, the truth is that companies look at if a project/change could make money for them and most of the time this is short term things; however, fintech is an opportunity to cut costs significantly, so companies will eventually take the time to integrate. Last, incumbents being resistant to change is simply not true, the article I wrote about last week was about UBS bank’s executive talking about banking needing to embrace fintech startups, so although finance does resist change, this is one change they will likely all embrace.

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