The world of finance is getting a 21st century makeover thanks to forward-thinking startups and their techno-centric approach.
Fintech companies are on the rise and fast. According to the Economist, Fintech startups garnered $12 billion in investments in 2014, a nearly $8 billion increase from the previous year. Despite representing only a small slice of the $4.7 trillion pie that big banks get to play with, the rapid rate of growth is notable. These new firms handle an array of financial needs, like crowdfunding, wealth management, and peer-to-peer lending. Wrapped up in their mission statements is a promise to put a long-forgotten financial player first: the customer.
The Great Recession laid bare the need for reform in the financial services sector, and slowly, Fintech startups started to descend upon the wreckage in order to creatively rebuild the industry through niche functions.
Maria Aspan at Inc. points out that the long history of regulation and specialization that’s typified the industry has lead to a growing frustration among employees and consumers alike. Their discontent has led to an atmosphere ripe for entrepreneurship, and in an effort to free the world from the oligarchical rule of the big banks, a multitude of tech-savvy financial workers have stepped up to instigate a change.
The industry-wide backlash against the banks coincided with the rise of smartphones and app usage, as documented by Nielsen, setting the stage for the rapid proliferation of the mobile, on-demand economy. As customers became increasingly comfortable with the concept, fintech startups rushed in with their convenient new approaches to online banking.
Pat Grady, a partner at Sequoia Capital, explains, “The tools that are available — cheap storage, cheap computing, and wonderful analytics — have changed, the regulatory environment has changed, and people are way more comfortable managing their money and business online.”
And the newfound level of comfort shows. According to Robert Gach, Managing Director of Accenture Strategy Markets, 2014 saw a “paradigm shift in how financial services companies approach and embrace fintech innovation.”
With customers on board, and banks and insurers investing, Gach anticipates major innovations among major banks across the globe. Grady agrees: “If you want to dream a little, the entire financial system could be remade with companies we’re seeing today.”
State of Affairs
Fintech companies have gained a foothold in a variety of financial practices. There are peer-to-peer lending companies, like Lending Club, Kabbage, and OnDeck, that help small businesses grow through piecemeal loans and funding.
Slightly different and easily confused, Kickstarter and Indiegogo are two examples of crowdfunding startups that help connect aspiring entrepreneurs with potential investors. On the personal side, wealth management apps, like Nutmeg and Mint, help individuals take their finances into their own hands, literally.
Where big banks are often lumbering and cumbersome, smaller and more nimble fintech startups save money while adhering to regulations. The lithe maneuvers afforded by downsizing have convinced Brendan Dickinson at TechCrunch that the insurance sector is the next clunky industry poised for a reboot.
Indeed, the agile, customer-focused movements of fintech firms have inspired businesses to employ social media and mobile apps for proactive shareholder communications. A Talkwalker article elaborates on how informal communications promote transparency, allow for changes suggested by company stakeholders, and keep business partners, clients, and customers informed.
In light of these considerations, along with the near-ubiquity of the mobile platform today, more and more public companies are turning to mobile apps in order to build a more connected relationship with investors and other important company stakeholders.
Industry-specific platforms like ShareholderApp offer powerful notification tools, one-touch functionality, and intuitive design to provide shareholders with the information they need to make informed decisions, and solidify company-investor relationships in the process.