As originally published on Forbes.
According to KPMG, fintech has established itself as one of the fastest-growing sectors over the past decade, with global funding reaching $111.8 billion in 2018, up 120% over the prior year. And, as the sector grows, people are naturally finding fintech startups touching everyday life in more ways than realized.
Like hidden figures inside a picture, many of today’s fintech companies are tucked away and out of plain of sight, yet material parts of the larger portrait of present-day financial services. These organizations are helping transform once complicated and time-consuming routines to improve customer experiences, creating unprecedented network effects.
Meet The Fintech Enabler
Initially, fintech startups were largely seen as competition for traditional financial institutions and threats to their market share. However, in practice today, fintech companies are also a core force driving innovation deep within the financial industry, not just as head-on competitors, but as collaborators that enable others.
As it happens, collaboration between fintech providers, traditional financial players and other fintech companies is now the norm, a key catalyst of the financial and payment industries’ changing landscapes. Rather than neatly grouped, distinctive camps working against one another, what has developed is a far richer and more nuanced fabric.
More Interesting Than Many Realize
This development means that individuals and organizations are interacting with a lot more fintech providers on a day-to-day basis than they are probably aware of, and would have far different experiences were it not for the fintech enabler hidden deep in the background of the bigger picture.
To illustrate, here’s a look at some of the invisible players that work to enable other services consumers have grown accustomed to:
Apps: Do you know what goes great with online shopping from the comfort of your home? Having your dinner delivered and errands handled. Do you see Postmates bringing a meal to your neighbor’s doorstep? And look — there’s the TaskRabbit you ordered to assemble your new shelves arriving by Lyft. What do they all have in common? You guessed it. A common fintech enabler. All of these companies use Stripe to fuel an on-demand economy that’s delivering convenience.
Challenger banks: In the UK, where open banking laws have been in effect for a more than a year, challenger banks have found a natural fit partnering with fintech companies to address market segments considered underserved by larger traditional players. One such example is Starling Bank. The mobile digital bank was launched in 2014 and granted a banking license by the Bank of England in July 2016. Since then, it has created an extensive financial services app by partnering with fintech providers for personal finance capabilities (Yolt), payments (Tribe), loyalty and rewards (Yoyo), and wealth management (Moneybox), to name a few.
It’s In The Details
The truth is that most of the companies that rely on fintech collaborations and integrations do it for the simple fact that it allows them to focus on their strategy, which in turn helps their ability to scale — in some cases exponentially.
But, what are they doing exactly? Are they helping to create new digital accounts, assisting compliance or supporting the massive number of payments on-demand companies need to make? Yes, yes and yes. Today’s fintech companies are changing all manner of banking as a service, from account origination to how institutions handle know-your-customer requirements, secure transactions and mass payouts.
Achieving a better understanding of the spaces and roles occupied by today’s fintech enablers requires pausing and taking a closer look. It’s like approaching a painting to appreciate the techniques an artist used to achieve a particular effect. Yes, I just used art as a metaphor for today’s financial services. I guess the world is indeed full of surprises.