Every time a new innovation enters the mainstream, pro and contra opinions always follow. It’s just inevitable. And these viewpoints will merge into one giant ball and create some misconceptions.
The same thing has happened to FinTech. Ever since FinTech shook up the financial world, misconceptions about the sector has entered public thinking. We can’t deny that FinTech is indeed disruptive and revolutionary, but is it truly going to destroy traditional financial institutions? We don’t think so, thus we invite you to take a look at these four common myths and misconceptions about FinTech.
It Will Get Stuck in a Bubble and Burst
The concept of “bubbles” in markets was introduced during the “dot com” era, when growth and funding for startup websites were climbing steeply. The rise of FinTech has been compared to the dotcom bubble. And yet there are now more than 45 FinTech unicorns (each valued at more than $1 billion) worldwide. Five of them have gone public, proving that the industry is not going anywhere. Not only do the numbers speak for themselves, the FinTech industry has given the world new business models. For example, companies like StudentFunder enables access to education for students who can’t find proper funding elsewhere.
FinTech is Not Secure
Just because FinTech is relatively new to the financial world, doesn’t mean it’s not secure. Yes, new technology is never completely safe from the possibility of cyberattacks, but FinTech is no more exposed to these threats than any other sector. Besides, any reliable FinTech company will have security and identity checks in place.
Only Talks About Lending and Payments
In the US, lending and payments dominate the FinTech industry by 80%. However, other areas like insurance, market provisioning, investment management, and capital raising are also making significant progress in FinTech. In fact, according to Venturebat.com, The World Economic reported that insurance is one of the biggest disruptors in FinTech, as advanced algorithms and computing power are changing the industry. There are also new financial management systems that are able to help people save money and time, boost credit scores, and detect fraud all in the same place. FinTech can also provide superior data analytics. Thereby the assumption that FinTech is a limited sector is simply false.
The Neverending Battle between FinTech and Banks
Conventional banks often feel threatened by FinTech, since FinTech is always seen as the “disruptive” one. But, actually, banks and FinTechs are getting along pretty well! In fact, fintech and banks are making collaborative progress for the financial industry. You see, fintech can often build products and services outside the compliance and regulatory frameworks banks face, but they often lack distribution capabilities. Also, because fintech is online-based, they can reach prospective client more widely and more quickly. Venturebeat even reported that according to CB Insights data, six major banks in the US have made strategic investments in more than 30 fintech companies since 2009! Well, enemies won’t do such a thing, will they?
We hope some of the misconceptions toward fintech have cleared away. The world, including financial technology, is moving fast. Watching the journey and further innovations of fintech will be an exciting ride.