Every Company Will Be a Fintech Company

Every Company Will Be a Fintech Company



...Why has the status quo persisted for so long, despite extreme levels of customer dissatisfaction? While innovation in any industry is hard, innovation in financial services is particularly difficult. Many of these existing institutions have been around for more than 100 years and have a large brick and mortar retail footprint. As a result, it’s hard to cut costs and roll out new products quickly—think about the many long-term leases and thousands of employees that need to be trained across the country. 

While many of these institutions may have billion-dollar-plus IT budgets, at some of the larger banks, 75 percent of those dollars is spent solely on maintaining existing products. This is a highly regulated industry, with multiple regulators across state and federal. It has a very complex infrastructure. So while this is a big opportunity for startups, there are huge challenges, too.

... There’s a parallel here: It used to be really hard to start a software company...Today, anybody can start a software company with a credit card and a laptop. Why? Amazon Web Services brought all of this infrastructure as a service. AWS dramatically reduced cost and complexity and unleashed thousands of experiments.

......This is not just a consumer phenomenon. It’s also happening in B2B. Take Shopify, for example, which provides website services for any merchant for a monthly subscription fee. Or Mindbody, a company that helps fitness studios like yoga studios manage their businesses, also for a monthly fee. Turns out both of these companies make nearly 50 percent of their revenue through financial services.

...So, why is this fintech explosion happening now? The “as a service” infrastructure is coming to banking. To understand why this is such a big deal, we need to look at how complex the banking stack is today.

Ever wondered what it takes to start a bank? Here’s a simplified version of what it looks like on the consumer side. In this highly regulated industry, first you need to apply for a license, which could take years. Instead, most of the new companies are finding a sponsor bank (effectively borrowing a license). But that’s just your first required partnership.

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