Misconceptions about the rise of fintech and the future of banking


In recent years, the term “fintech” has permeated throughout Silicon Valley and around the world. In its earliest uses, fintech was simply a term coined to describe the marrying of technology and finance – the use of technology to digitize traditionally physical process such as sending and receiving money. But the technologies and products that drive fintech have increased exponentially. What once was a niche industry is now a key driver of global economic growth and financial health.

And while the progress of fintech is undeniable, there is still work to be done for the industry to realize it’s true potential. With its massive opportunity to transform how individuals and businesses interact and transact, fintech is a constant source of interest and speculation. Unfortunately, some of this excitement stems from industry-hype that has led to some bold mischaracterizations of fintech. To help us focus on the impact for this industry moving forward, there are a few misconceptions that need to be addressed and corrected.

  • FINTECH IS NEW. Though the term fintech may have become a popular phrase in recent years, the reality is that technology has been driving change in financial services for decades. Over 100 years ago, telegram companies started offering money transfer services and since then the movement of technological advances in finance like ATMs, check images and online banking each testify to the long-time existence of fintech. The truth is that there has been continual evolution in financial services right alongside technological advances. Rather we are now in a moment where financial developments have the potential to change the existing landscape quite dramatically and with unprecedented scale.
  • FINTECH IS OUTSIDE OF THE TRADITIONAL BANKING SYSTEM. Another common myth is that fintech exists only as a challenger outside the traditional banking and financial systems. In actuality, large scale innovation in fintech is happening in connection with existing financial systems and in partnership with financial institutions. When handling finances at a global scale, in many cases you will still find formal financial systems as part of the process. What we actually are seeing is ecosystem advancement; simultaneous growth and evolution of the many pieces that make up the whole of fintech products – financial systems, banks, regulations, etc. In fact, the infrastructure and access to scale that traditional financial institutions provide is incredibly valuable, and very few fintech companies can expect to scale unless they partner with the broader ecosystem.
  • FINTECH IS UNREGULATED. Fintech applications are largely regulated based upon the financial service they provide. Not only do financial regulations apply to fintech, but fintech companies are also required to comply with consumer protection regulation overseeing user experience. Moreover, partnerships with existing financial institutions means that regulation already exists for the sources of funding for Fintech. The question, though, should not be about more or less regulation, but about smarter regulation.
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Quite simply, fintech is really about redefining the ecosystem in which money exists. The future of finance isn’t necessarily about finding something new, but better understanding the current financial landscape. And, most importantly about serving individuals, small businesses, and institutional clients of financial services better.

What we can take away from these misconceptions about fintech is the need to look at the industry in a more holistic manner. To truly make advancements we need to partner across the ecosystem with new and existing systems and institutions. In a recent white paper published by our team, we outline the benefits of this evolution and the steps needed to take advantage of where fintech stands today.

There are numerous barriers that currently keep us from being able to realize fintech’s potential social impact at scale, but very tangible steps that we can take today to create a more inclusive financial system that works for all. We all have a role to play in developing long-term, sustainable solutions that will empower people, and their communities, around the world to thrive. And I believe that fintech innovators have a massive opportunity ahead and nearly unlimited potential to drive economic growth and increase the financial health of billions of people across the globe. But we will only be able to do so if we work together to overcome these myths and move the industry forward.


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