It’s no secret that FinTech is booming. The sector is attracting users and investors by the millions, taking over operations that were once exclusively the domain of banks. UK neighbourhoods, such as Shoreditch, Old Street and King’s Cross, have undergone dramatic overhauls as they have become hubs of the industry. Everyone wants a piece of the pie.
Banks fear the rise of the FinTech sector, and with good cause. They’re quickly being replaced by the far more attractive options FinTech companies are increasingly able to provide.
But why is it that the FinTech sector is rising so seamlessly? Here are the 5 main reasons:
1. Government engagement
The UK government in particular has recognised the potential of the FinTech sector, and have done their best to provide grants and investment to up-and-coming financial services businesses. The Seed Enterprise Investment Scheme (SEIS) offers great tax breaks to those investing in startups, in order to promote investment in the FinTech sector. This, predictably, has become a cycle. The more advantages the government gives to FinTech services, the more attractive their services become, providing even more incentive for government investment.
2. New technology
FinTech is obviously at the forefront of the latest technology. Moving, managing, and making money through financial services has never been easier, which gives customers (and not only the young) little reason to wrangle with the unevolving systems of traditional financial services. If a bank requires you to use any technology bigger than a smartphone, they’re lagging behind.
3. Low costs; exceptional service
FinTech companies face very low service costs, yet because they are constantly finding new, more efficient ways to provide customer service, they’re well ahead of the banks on that score. Also, remember that perception is everything. Although the banks are improving, we still associate them with the call-centres and queues we which were standard until a few years ago (and some banks haven’t changed even now). On the other hand, working with FinTech companies is and always has been an entirely painless experience.
4. Talent surplus
The global financial crisis left many very talented young graduates unemployed. It also caused a shift in the newer generation’s perception of big banks. Whereas before the crisis, the ideal option for a new graduate was to line up for a job at a big bank, now they see opportunity in vibrant, young, non-traditional business models. They can play a part in bringing in the new wave, rather than the drudgery associated with the old-school financial services industry.
5. The time is right for small businesses
Business is no longer the domain of massive corporations with thousands of employees. Tiny businesses can now have highly sophisticated supply chains, and the ability to market globally on the widest scale. But banks are ill equipped to deal with the needs of small businesses, and regulations are ensuring it stays that way. Providing services that small businesses specifically need is usually unprofitable. Banks cater to the traditional business model. FinTech services cater to the ever-growing field of successful startups and help them make cheap international money transfers with ease.
It’s only getting better for the FinTech sector
The above 5 reasons, among others, are ensuring the FinTech sector is going to keep on booming. The bigger the boom, the more potential there is for even greater growth. In other words, it’s getting exponentially bigger and better.
While it usually takes a couple of generations for the traditional to become antiquated, the startling FinTech boom is hastening the process. Now is the time for FinTech. Banks and traditional financial services providers are no longer looking anxiously over their shoulders. They’re now staring into the distance.