Considering the Direction of Fintech
The banking industry is undergoing a financial technology evolution. At one time, the name “fintech” represented the companies that provided much of the banking tech infrastructure. Today, fintech also encompasses innovative companies leveraging new digital solutions.
Financial technology innovation, particularly in the trending areas of voice recognition, financial information, machine learning, payment strategies and digitalization, constantly evolves, challenging banks and credit unions to develop its tech capabilities while improving user experiences. Fintech has already changed how people, and businesses, invest, borrow, save and transfer funds through online and mobile services.
Fintech organizations have disrupted the traditional financial ecosystem by energizing emerging technologies in new ways to lure consumers searching for a more personal banking experience. Some of the diverse types of non-bank produced fintech includes mobile wallets and peer-to-peer payment apps, such as PayPal, Venmo, Square, Apple Pay and Google Pay; funding platforms, including Kickstarter, GoFundMe, Indiegogo, Patreon, CircleUp, and LendingClub; and robo-advisory services, such as Betterment, Ellevest, Wealthfront, SoFi Invest and Schwab Intelligent Portfolios.
Many traditional institutions, which adapted gradually with upstart fintech solutions, have come around the either partner or ally with startups and recognized companies in a digital transformation strategy, now accelerated due to COVID-19. Digital transformation is a major driving force in the fintech/financial institution alliance with the relationships evolving into more partnerships, collaborations and co-creation between fintechs and traditional financial institutions.
Some see partnerships between traditional financial institutions and fintechs vital to the traditional banking industry’s sustainability. In a recent Finextra study, 81% of bank executives surveyed said collaborating with partners was the best strategy to achieve digital transformation.
Open banking figures to play a vital role in the fintech/financial institution alliances because it allows partnering organizations to lower their shields on application programming interfaces (APIs). This provides third parties with the entry point to the banking data needed to provide account holders with the new personal financial management tools and transparency they want.
While the pandemic has impacted development so far, fintech still figures to continue to make its presence felt in the financial industry. According to Deloitte there were 30 venture capital backed fintechs launched in 2019, versus 76 in 2018. While Deloitte noted in the first quarter of 2020 no reported launches occurred; and the fintech investment of $9.3 billion dropped by 37% percent compared to the same quarter in 2019, strong fundraising continued in banking and capital markets ($5.3 billion) and real estate ($3.1 billion) fintechs, with those sectors receiving 90% of total funding in this year’s initial quarter. U.S.-based fintech investments stand at $4.3 billion, more than any other country, accounting for 46% of total funding in 2020’s first quarter.
NXTsoft’s vendor agnostic OmniConnect Platform, the premier open banking marketplace for all API needs, uses cutting-edge cloud technology to connect fintech solutions to financial institutions, ensuring that NXTsoft clients have the most secure and reliable integration environment in the industry. OmniConnect provides the access needed to the financial institutions information, removing integration obstacles and providing a seamless connection between third-party API solutions and financial institutions’ core digital banking, item processing and financial systems.