One of the common tropes of the
As is always the case with broad sweeping statements, the truth is far more nuanced. Part of this has to do with the fact that ‘fintech’ is such a general term and encompasses a wide range of financial services. Are we talking about payments, wealth management, or peer-to-peer lending? Fintech’s entry into each space has its own unique effect on the traditional status quo. In some
One key regulation passed in recent years is PSD2, which is the Payment Services Directive. Under this regulation, banks are obligated to allow third party providers access to customer data and payment infrastructure via application programming interfaces. This presents a powerful opportunity for
A 2016 PricewaterhouseCoopers survey of PSD2 regulation asked senior executives in 30 leading banks in eight European countries how they foresee PSD2 will affect their business. 88% expected PSD2 to have an impact on their business, 84% foresee strategy changes, 68% feel they will be weakened and are concerned about losing control of their customer interface, and 53% think there will be a risk of liability problems.
In another 2016 survey conducted by the International Data Corporation of 265 retail and corporate banks in 24 countries, it was found that the majority of banks (69%) actually viewed fintech companies as either possible collaborators or acquisitions. Only a minority of 25% of banks surveyed viewed fintech companies as direct competition.
But if there are two areas where it is agreed that
Let’s take a look at one of the cornerstones of lending, mortgages. Increasingly, the process of a customer going into a bank branch and sitting down with a loan officer to get a mortgage is being replaced by a ‘digital mortgage’. In a digital mortgage, the applicant may be able to go through the entire process from application to approval with zero human intervention on the lender’s side.
With banks hampered by regulations, non-depository lenders, particularly in the United States, have been quicker to innovate with digital mortgages. Quicken Loan, a mortgage lending company based in Michigan, USA, introduced its Rocket Mortgage toward the end of 2015. In the first nine months of 2016, the Rocket Mortgage saw over $5 billion in loan volume.
Digital mortgages, among other innovations, have made a significant impact on the market share of the large banks. From 2008 to 2015, these banks saw their market share cut in half.
While non-depository institutions are reaping most of the benefits from the rise of the digital mortgage, they are still a financial institution. Not so in the case of peer-to-peer (“P2P”) lending which instead matches borrowers with ‘investors’. And while the P2P lending industry is still in its infancy, research has suggested a stunning growth rate. Morgan Stanley has suggested a global volume of $150 to $490 billion by 2020. Transparency Market Research has suggested almost $900 billion by 2024. And those reports may be understating it; in June 2016, Chinese regulators revealed that P2P lending volume in the country
If you’re reading this article, then you’ve probably heard about
The industry has now embraced
But even as the industry adapts to the presence of
As technology increases automation across an increasing number of industries across the globe, the debate rages, is
While sustaining innovation refers to the creation of newer and better products and efficiency innovation is the lowering of
Looking at these criteria, how do the above examples of lending and
Does this mean that all of