A high-stakes competition is underway between traditional financial services institutions and disruptive FinTech startups.
The Economist reports that more than $25 billion has been invested in financial technology — FinTech — in the last five years, with 4,000 firms challenging banks in just about every product line. As financial services comprise about $1.2 trillion of U.S. GDP, increased levels of investment are likely.
Big banks have the advantage in this fight — at the moment. These institutions have well-earned reputations for safety and security. They benefit from strong, multi-generational customer relationships, have considerable brand equity, and offer myriad financial products and services.
Except well-funded, agile FinTech startups including SoFi, Billguard, Square, Wealthfront, Venmo and Neighborly are innovating and nibbling away at banks’ market share. They’re doing this by offering custom solutions for everything from student-loan refinancing and payment processing to lending and facilitating neighborhood investment.