Key Aspects to Financial Technology
Financial technology is a relatively new field, but the market has grown substantially since 2008. The market is so big, in fact, that nearly 40% of the workforce in London is employed with a fintech firm of some form. Here are some of the key aspects of that industry that have allowed for that exponential growth.
Agility
One of the major problems banks have is that they are often too large to handle the smaller transactions that a growing majority of the population needs. Short term loans are a good example. It would cost a bank too much to underwrite a short term loan, especially if they had to deal with thousands or hundreds of thousands. Startups that are equipped to serve P2P lending are better able to service that underbanked portion of the population.
Data
Data fuels much of this growth, especially as we gather more data about the savings habits of people at various income levels. Banks need this data to improve their services, and companies are developing with the sole purpose of crunching this data.
Regulation
Regulation will also come into play at some point, and, to a certain extent, has already become a factor. One big example has to do with how much cash banks need to keep on hand. New requirements outlined in Dodd Frank have made it harder for banks to lend. That’s created opportunity for startups, but that same legislation can also hamper innovation depending on how it’s used.
Bio: Firoz Patel is the former CEO of AlertPay Inc., and successfully brokered its acquisition by the UK-based MH Pillars. Read an article about Payza here to learn more.