Fintech Looking Forward


Digitization has transformed daily life from how we get news to shopping for groceries. Just like the newspaper that no longer comes to your driveway, digitization has revolutionized the payments industry. Apps like Venmo, Apple Pay, and Zelle have taken physical forms of payment like checkbooks and cash and put them into the digital world. As individuals evolve away from physical forms of payment, businesses have slowly begun to follow suit with electronic payment disbursement programs typically offered through their existing banking relationships.

Fintech, defined as any technology-based financial services, is expected to play a much larger role as we proceed into the digital age. One of the most imminent potential profitable markets in this coming age will be how people manage their finances. The integration of the smartphone as a necessary tool in everyday life has made clear the need for technological innovation in all markets. As large banks’ tech-based innovation continues to lag, many fintech services have already begun to eat into these bank’s business, forcing them to either adapt or merge.

The initial setback for banks came in 2008 when they had to shift their focus to adapt to new fines and regulations of the post-financial collapse. This is where ambitious fintech startups found encouraging market share. In 2015 Jamie Dimon, CEO of JPMorgan Chase, famously said “Silicon Valley is coming” in reference to tech startups imminent movement into the finance market. Although this prophecy has not been completely fulfilled, fintech companies are quickly gaining market share as accounts payable departments are trying to streamline and improve efficiencies. Paying close attention to how much time and resources are being spent on things like reconciliation.

Unfortunately for financial technology, competing with banks is an uphill battle and comes with risks. However, there are potentially huge rewards associated with these risks. More and more businesses each day are transferring their accounts payable disbursements to virtual credit cards and other electronic payment-based programs. Businesses see the benefits of electronic payment programs including, fast and easy payment reconciliation, increased security, better internal controls and transparency, and new revenue streams generated from rebates. Banks have changed very little to develop the way they operate their services since the early 2000s. Although many banks are capitalizing on personal banking trends and financial technology, minimal innovation and digitization is offered to commercial businesses. As a result, much of the business-to-business (B2B) transactions are still made with handwritten checks. Checks are still used because they offer one to one reconciliation, making them a breeze to reconcile compared to other forms of payment. Handwritten checks can also make sense for smaller vendors who lack the resources to capitalize on ePayables rebates. But these handwritten checks are a breeding ground for human error. Now in 2019, errors like this should have long been a thing of the past.

By using different fintech services independent of their banking relationships, companies can now manage assets, transfer funds, automate AP, and generate new revenue. These resources streamline many financial processes that once would compromise efficiency and create the potential for fraud. Despite the clear benefits of these services, many companies are hesitant to switch due to interdependent relationship with their banks. Commercial banking relationships are a very large hurtle to overcome, and often time companies simply do not investigate non-traditional banking options for new and innovative financial technology.

Fintech has bred a new class of customer that values transparency and service over large reputable banks. This is forcing banks to embrace fintech services to keep their market share. The historically large intimidating nature of banks and their deep roots in the world economy make them difficult to overcome. But fintech is here to stay as investment in the industry hit a peak of $62.5B in 2015 and has continued to see consistent investment sense. 

Mckinsey Panorama estimates that almost 80% of banking financial companies have invested in fintech partnerships. Consumers’ continued distrust with banks will see a shift in 2019 that will likely spur further investment in the already rapidly growing industry. According to CB Insights, venture capital-backed privately owned “unicorns” are worth a total of over $154.1B. Although fewer fintech startups have sprouted this year, general funding and investment is trending up for specific categories like banking. With more and more businesses looking to streamline accounting procedures, reduce costs, and increase revenue 2019 is set to be another landmark year for financial technology.

The future looks bright for Financial Technology Innovations and broader B2B adoption!


Keep your system. Change the way you make payments.