How Much Tech Is In FinTech?

The past few years have been consistent in praising FinTechs and establishing their position in the industry as innovators and direct threat to banks. “FinTech reshaping banking” has been one of the most popular headlines, and traditional banks have been feeling the pressure not only from the hype but from the actual innovation FinTechs brought to light. The model FinTech industry proposed solved all other problems banking did not - gaining more market share, pressure on margins, security, and customer churn. However, a great deal of these issues seeing a resolution is due to sophisticated technology. Therefore, how much tech is in FinTech, and are the technological enhancements and innovation solely responsible for the digital banking revolution?

To answer the question – yes, there is a lot of tech in FinTech. A considerable amount of FinTech companies started out selling tech solutions for the banking sector and that changed the narrative. During the past decade, breaking into the financial services industry and innovate there, has been a cumbersome mission. Tech companies finally got the right product and model and took on globally.

Although, many like to argue that many of the FinTech startups are only tech companies, we beg to differ. In spite of complex technologies catering to an ever-changing financial sector, such tech products would never work and also appeal if they would not make sense to consumers and businesses. The need for faster, cheaper, and scalable payments was acute. This is how FinTechs’ technology became a working business model too.

Can banks survive?

The long-time obsession of traditional banks with “controlling” its customer base has been replaced with a new strategy of adding value to a larger value chain. Vertical integration is now specialization, which enables more efficient use of resources and quicker growth. In the end, the real threat are the banks themselves, predominantly those large institutions that already control much of the financial system.

The tech was definitely missing from traditional banks’ operational model and is now a central component of the FinTech sector. The tech itself enabled different capabilities the digital banking system did not experience before, and now it set the bar quite high. What could be the next step for FinTech technology and companies?