There is a common conception that fintech remains the preserve of the early adopter. It is certainly fair to arrive at this conclusion — after all, the media’s portrayal of fintech is one of futuristic mobile payments, ethereal discussions about blockchain and ping-pong playing startups in Silicon Valley.
However, I don’t think this conception is accurate. Fintech is no longer waiting in the wings for the act of the majority. Traditional institutions have begun to forge major partnerships with fintechs, meaning that financial technology is reaching more people than is commonly understood. This is how fintech is moving further into the mainstream.
Going beyond the early adopter
‘Early adopters’ are often profiled as twenty-something city-dwellers who have grown up with the internet. Entering adulthood to a soundtrack of anti-bank rhetoric and the transformative power of the internet, early adopters have become pretty open to controlling their finances through an app.
Early adopters contrast with middle aged and older people, who are traditionally more sceptical about trying new financial technology products. Often citing a lack of trust in fintech companies, they tend to stick with more established players for personal banking, loans and insurance.
However, the landscape is changing. Traditional institutions are increasingly collaborating with fintechs to diversify and improve their offerings. For instance, Natwest (RBS) recently partnered with Ezbob to create Esme Loans, a digital platform that provides quicker and easier loans to SMEs. Nordea Bank has incorporated Spiff’s social savings app, and ING is collaborating with Kabbage to bolster their credit offering to small businesses. Through being channelled through traditional institutions, fintech is already moving past the early adopter.
Partnerships and collaboration
Increased collaboration between fintechs and traditional players is hallmark of fintech’s evolution. Traditional institutions have the power to deliver fintech products to large audiences — a key driver in making it more mainstream.
To get a piece of the innovation pie, myriad banks have sponsored accelerator programmes for fintech startups, with many more establishing internal innovation and venture capital arms. Fintechs themselves are also maturing — they’re learning processes from traditional institutions, making increasingly senior hires and even applying for full banking licenses (N26 and Zopa are prime examples). Through partnerships and collaboration, fintechs and traditional institutions are beginning to converge.
Case study: alternative lending
A significant arm of fintech is alternative lending, such as peer-to-peer lending and online lending. In fact, a 2016 report by University of Cambridge and Nesta showed that alternative lenders service 3.43% of gross lending to SMEs in the UK. As a percentage this may sound small, but by volume, it’s a sizeable chunk of a huge, multi-billion dollar industry. And it makes sense: alternative lenders stepped up to bridge the credit chasm that followed the global financial crisis, providing finance to those being left behind — like small businesses.
While I can’t speak for every alternative lending company, I can tell you what I’ve learnt from directing one. Spotcap’s average client is over forty, has been in business for minimum 7 years and enjoys an annual turnover of £1–10 million. In other words, the demographics of our average client are nowhere near those of the average early adopter. Spotcap’s reach beyond the early adopter is largely powered by the partnerships we have made with traditional lenders, brokers, accountants and advisors.
For me, fintech moving beyond early adopters is not a hypothetical conversation — it’s a real outcome of how the industry is evolving. As collaboration between traditional institutions and fintechs is increasing, fintech products are gaining greater exposure to mass audiences. Alternative lending is a particularly salient example of this. So, while the word ‘fintech’ may still be at the edge of the public’s consciousness, it is certainly not at the edge of their wallets.
Originally published on Medium on 16 May 2017.
Originally published May 16 2017 , updated February 25 2020