What is the Impact of US FinTech on Banks: Ken Research


The pursuit of customer centricity has become a main priority for all sorts of financial institutions. The digital consumer’s preference for a superior customer experience, quick response and convenience has accelerated the products and solutions offered by FinTech companies.

Disruptive Effect

Although banks have been slow to adopt technological changes owing to security issues, banking has been one of the sectors that is most resistant to disruption by technology. Retail, media and travel are three of the many sectors that have been significantly disrupted by technological shifts. Banking had largely remained unharmed due to strict regulatory barriers. However, public trust and confidence in this sector is quite low presently and banks and have been hit by sanctions and political rebuke.

Online payments are still a cumbersome process with users needing to type in usernames, passwords, 16 digits from the credit card and other things. Payment wallets and payment gateways have transformed the way customer make payments.

Consumer banking, fund transfer and payments are the sectors that are at high risk of disruption by the FinTech industry in the next 5 years. Emergence of online platforms has allowed individuals and businesses to lend and borrow between each other. Establishment of alternative credit models, use of non-traditional data sources and powerful data analytics to value risks, quick disbursement of loans and low operating costs have allowed the FinTech companies to flourish. Moreover, technology driven payment processes and digital wallets that enable easier payments have led to increased use of smartphone and other devices to transfer money and make payments.

Collaborative Effect

Traditional financial institutions are aware of their inefficiencies, slow processes and high fixed costs involved into every transaction. FinTech companies are not just bringing concrete solutions to consumers but also empowering them by providing new services which can be delivered with the use of technological applications. Digital services have been able to address their needs in a more convenient way than traditional nine-to-five financial institutions. Although FinTech companies have been chiefly successful in the transaction and lending aspect of the banking industry, they have had almost negligible effect on traditional banking operations such as deposits and large volume loans.

It is highly unlikely for FinTech companies to replace traditional banks and both can co-exist in a symbiotic relationship…

Collaboration between FinTech and traditional institutions can be an effective way to identify challenges and opportunities as well as to gain a deeper understanding on complementing each other.

How has the Equity Crowdfunding Market Placed?

Crowd funding involves individuals who pool money using a platform to fund the projects by other people or organizations and Equity crowdfunding involves trading equity of a company for the cash collected by the investors. Till 2015, the regulations in the U.S. only permitted accredited entrepreneurs to raise money from equity crowdfunding. These investors have to meet certain levels of wealth, established by the SEC. However, in the near future the SEC would make it legal for entrepreneurs to raise money from the individuals who are not professional investors as well.

The major players in the market include EquityNet, Fundable, Angel List and Crowdfunder with a market share of ~%, ~%, ~% and ~% respectively Equity crowdfunding have observed rapid growth in last few years especially after JOBS act passed in 2012 owing to the above propelling factors. This is coupled with higher comparative regulations in collecting equity funds from other sources. The other important factor which provided an impetus to the equity crowd funding market is the growth of startups in the country and also the implication that the entrepreneurs can move up from seed funding to different levels of funding. This provides them with easy access to the required capital.

The government has been looking forward to boost the confidence for the investors to invest in the market. The title 3 of JOBS act’s regulation CF passed in May 2016 has already allowed the individual investors to invest in the market, further rules and regulations would definitely help boost the investor confidence such as the platforms would have to purchase a fidelity bond of at least USD 100,000 as insurance for crowd funding. However these steps will impact the marketplaces by increasing their operational costs.

In the short run the market would incline at a rapid rate on the back of increased investments by the individual investors, pro investor regulations of the government and increased data availability. This would help the market grow to USD ~billion by 2017.

Further in the longer run, the realization of the disadvantages to the unsophisticated investors, inclined interest rates and higher interest of the institutions would collectively have a dampening impact on the market and slow down the growth rate of deal values in the US Equity Crowdfunding space and lead the market to USD ~billion by 2020.

Key Factors Considered in the Report

  • Comprehensive analysis of the US FinTech market and its segments
  • Listed major players and their offerings
  • Identified major developments in last few years and assessed the future growth of the industry
  • Government initiatives taken to stimulate the growth of the market.
  • United States Market Trends Fintech
  • Business Lending Market Future
  • Global Fintech Market
  • Challenges Fintech Market
  • Financial Services FinTech Industry
  • Fintech Market Growth
  • Top Financial Technology Market
  • Mobile Payments Market
  • Money Transfers Market United States
  • Digital Commerce Market
  • Marketplace Lending Industry
  • Loan Disbursed FinTech

Companies Cited in the Report

List of Major Companies       Companies Covered in the Report

Android Pay

Angel List

Apple Pay

Authorize.Net

Chase QuickPay

Crowdfunder

Dwolla

EquityNet

Fundable                                             Major Players

Lending Club

OnDeck Capital

PayPal

Stripe

Vanguard

Venmo

Wealthfront

For more information about the publication, refer to the below link:

https://www.kenresearch.com/banking-financial-services-and-insurance/financial-services/us-fintech-market-report/54351-93.html

Related Reports:

https://www.kenresearch.com/banking-financial-services-and-insurance/financial-services/cards-payments-industry-us-emerging-trends-2019/3456-93.html

https://www.kenresearch.com/banking-financial-services-and-insurance/financial-services/north-america-mobile-money-market-research-report/632-93.html

Contact Us:
Ken Research
Ankur Gupta, Head Marketing & Communications
Ankur@kenresearch.com
+91-9015378249

https://www.kenresearch.com/blog/2016/12/impact-us-fintech-banks-ken-research/

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