The global rise of financial technology has sparked opportunistic trends in fintech markets for many businesses. With very little oversight, plentiful investment, and plenty of room for innovation, business owners in fintech firms have enjoyed much growth in the previous decade. However, that growth has resulted in complications, increased competition, and disruptive trends in the industry that can threaten the success of a business. Business owners involved in fintech can stay ahead of the curve as long as they understand these trends and the challenges they represent. You may need additional financial consulting within the industry. To get started, here are global trends in fintech markets that have been disrupting traditional business strategies.
The Rise Of Non-card Payments
For most of the past 20 years, credit and debit cards have dominated the electronic payment landscape. However, that has been changing lately. Originally gaining popularity in China, a major innovation in cell phone technology has allowed payments to be processed via the Near Field Communication (NFC) chips in modern phones. Customers have also begun using this technology to use their phones as an electronic wallet. Merchants are beginning to adopt this technology because it offers lower transaction costs and faster transaction times. Business owners in fintech should be aware that accepting every major card is no longer enough in this fast moving market.
Consolidation Of Minor Firms In To Major Players
In recent years, the fintech industry has become more crowded. This is a result of the market space filling with competing firms. For smaller firms in particular, this represents a threat as larger firms are now seeking to consolidate the market. Since financial technology relies on network utility, large companies are looking at mergers and acquisitions opportunities. As large companies like Visa or Mastercard enter the industry, they will use their existing capital to take over smaller firms. In turn, customers are naturally drawn towards which ever company has the widest available service. Business owners in charge of small firms should understand that they can be in a precarious position.
Regulatory Bodies Are Increasingly Looking Into Fintech
Governments are taking the fintech trend seriously. As such, regulatory bodies representing those governments are ramping up their efforts to oversee fintech firms. Regulatory bodies in the United States haven’t issued any formal guidance or laws, but business owners should plan around some measure of regulation. For now, government entities are observing fintech and trying to determine what course of action will be taken. As fintech deals with global transactions and the most successful firms are processing billions of dollars, it’s only natural that regulatory oversight will come to this market.
Scrutiny From Investors Is At An All Time High
In response to global fintech market trends, investors are scrutinizing startups rigorously. They want to see a strong business model that can return profits. While large amounts of money continues to flow into the fintech sector, investors are also beginning to demand better revenue management for fintech businesses. Studies show that despite increasing amounts of investor funding, the amount of early-stage fintech firms that receive investor cash has halved from 2014. New companies wishing to break into the marketplace are expected to have a clear pathway to profit. Increased market competition has also led to investors looking for a business to offer a unique selling point that puts them ahead of their competition. Business owners should ask themselves if their business models can offer concrete returns on investment.
Tech Companies Investing In Fintech IP
Traditionally, fintech has been the domain of smaller, recently founded companies and startups. Recently, the entry of Visa and Mastercard into the fintech field, as well as Facebook’s desire to start their own cryptocurrency has changed this. Bank of America recently filed over 50 patents related to blockchain technology. Traditional payment processors have begun to notice the benefits of innovative fintech developments and are now aggressively expanding. The established reputation, vast international networks, and massive capital and resource stockpiles of these companies makes them a difficult opponent for smaller, younger businesses with limited capital funding. Business owners will have to look for opportunities and take risks that larger corporations cannot in order to stay ahead.
The recent successes of the fintech industry has been great for the market’s outlook as a whole. But, this success was not without consequences. New technologies, trends, and strategies have arisen to threaten the established conventions of the fintech industry. New technologies like NFC and peer to peer wireless payment options have changed the way consumers pay for things. As smaller firms established themselves, they have sought to consolidate their market share and buy out incoming firms before they can pose a threat. The increasing amount of money has attracted attention from governments across the world, who are weighing their options on regulations. Higher profits has also lead to stricter investor scrutiny from venture capitalists eager to protect their funds. The potential profit has also woken traditionally conservative institutions like banks and they have quickly become large players in the field. While there is still much opportunity in this growing field, business owners should be aware of these disruptive trends in fintech markets in order to survive, and even thrive off them.