Note from the Publisher: This interesting insight from research group McKinsey was brought to our attention by our friend Ken Akoundi at Investor DNA. In the piece, McKinsey’s team notes that corporate and investment banking-oriented fintechs are not so much seeking to disrupt, as to assist with existing business models. That is different than the wealth management, retail banking, lending and payment systems categories, which comprise nearly 75% of new fintechs. In those categories, the new fintech entrants are indeed looking to overtake their traditional counterparts.
“Fintechs, the name given to start-ups and more-established companies using technology to make financial services more effective and efficient, have lit up the global banking landscape over the past three to four years. But whereas much market and media commentary has emphasized the threat to established banking models, the opportunities for incumbent organizations to develop new partnerships aimed at better cost control, capital allocation, and customer acquisition are growing.
We estimate that a substantial majority—almost three-fourths—of fintechs focus on retail banking, lending, wealth management, and payment systems for small and medium-size enterprises (SMEs). In many of these areas, start-ups have sought to target the end customer directly, bypassing traditional banks and deepening an impression that they are disrupting a sector ripe for innovation.”