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KNOWLEDGE BASE

THE MYTH OF FINTECH DISRUPTION

29 September, 2016

Rather than disrupting finance, fintech will offer plentiful chance for open innovation with established players. London leads the way. The shape of things to come.

Fintech (financial technology) start-ups, combining IT and financial services in new ways, are said to be the disruptors finance – what Uber is to taxis and AirBnB to the hospitality industry, the likes of Lending Club (link) are to banking. This analogy is flawed, however.

Rising interest

It is getting a lot of traction nonetheless. Martin Wolf, the Financial Times’ leading commentator, dedicated an entire column to the topic just this March, explaining how fintech will disrupt finance. At the World Economic Forum, the fintech session was in such strong demand that it had to move venue. A list of prominent bankers leaving finance’s most prestigious institutions to join fintech start-ups just adds to the belief that fintech is approaching its event horizon. The latest convert is Anshu Jain, who left Deutsche Bank after a brief, unsuccessful, and stormy stint as co-CEO, for SoFi, a fintech start-up from Silicon Valley.

Cities around the globe are stepping up their efforts to become the world’s capital for this fledgling industry, too, with London and New York in the lead. This rising interest is reflected in the stellar rise of fintech investment, which has tripled from 2013’s $4bn to $12.2bn in 2014 (see chart below). KPMG, an accounting firm, estimates that it has broken the $20bn mark in 2015. Thanks to its financial firepower, America’s fintech sector is the world’s biggest by a wide margin.

By Markus Winter