Will the 2020s represent the death of “fintech”?

Over the past few years, ‘fintech’ has become a one-size-fits all namesake for any company trying to seem cutting-edge or trendy. Journalists and their readers have cast the term into the “gloss over and delete email” bucket along with ‘innovative’, ‘corporate social responsibility’ and *shivers* ‘agile’.

With the last five years of overmarketing and dodgy intern-written corporate blogs, we’ve lost sight of what fintech actually means: financial-technology. And I think the term is rapidly approaching its best-before date. It’s going to become less and less fashionable to affix the term ‘tech’ onto the end of ‘finance’ and expect that to be a substitute for a good service.

Once upon a time, a business which sourced its leads primarily via the internet would have described itself as an “internet business” (part of the almighty “dot com” movement) whether they sold server space or washing machines. Nowadays, an internet business is just a business. Calling yourself an “internet business” in 2020 would be like calling a bus a “motorised wagon” – it would just look silly.

That process has already begun to set in; a process of defintechification (sorry). Every single big bank is developing some kind of ‘fintech’ solution, dismantling their legacy banking frameworks in order to integrate more effectively into the burgeoning world of open finance.

Thanks to Open Banking and the transparency rules emerging as the financial services sector settles into a post-PSD2 landscape, banks and other institutions are having to put technology right at the core of their operations. And that’s just as well. If they are to keep up with the fast-paced customer experience that consumers have come to expect in the world of instant streaming and 7-second cat memes, finance companies will have to basically become technology companies.

Hence the success of Monzo, Revolut and other challenges in the sector – our generation of consumers are best won-over by card transactions flashing across their smartphone screens, making paying and saving an almost gamified experience.

And as the legacy banks cotton on to the fintech tide, and Open Banking forces more and more old-school players to fintech up their services, there will be a process of consolidation in the fintech space. To reuse the dot-com analogy, we used to have Bebo, Myspace, Facebook, Twitter, Friends Reunited, Google Plus, Instagram (and so on), and that’s more or less been consolidated into Facebook, Twitter, Instagram and LinkedIn. And even Instagram is owned by Facebook…

I’m not saying that the legacy banks are going to subsume all the challenger players in the space – when Google attempted to launch Google Plus, hailed as the social media platform to end all social media platforms, it flopped momentously.

The reason why it failed was, at least in part, because they tried to apply the same principles of their search engine to their social network – most notably rank-based presentation of users, so users who produced “more relevant” posts appearing higher in your newsfeed – they discovered that one size doesn’t fit all. And this demonstrates why legacy banks will never be able to totally subsume all the smaller players. Institutions can’t respond to new demands with the speed that consumers demand, especially with their outdated systems and exacting compliance.

However, what we will see in the next decade is a consolidation. Having quite literally thousands of financial planning solutions, challenger banks, payment facilitators, credit rating tools, finance providers (and so on), all umbrellaed under the all-embracing term “fintech”, is by no means sustainable. Sooner or later we, the customers, are going to need more than just “fintech” to sell us a product or service. And when that term finally dies, the firms that offer little more than a fashionable job description will die with it, and what we will be left with is a handful of great companies with great products.

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Jack Benda

Senior Account Executive