Blog, NewsBy Tribeca Venture Partners
I am excited to finally announce the publication of Finding Genius. As a contributing author, I wrote a chapter unpacking major trends, opportunities, and challenges in the fintech space.
Fintech is incredibly complicated, and when I sat down to write my chapter, I thought about many high-level trends. After 2 years of researching, interviewing, and writing this chapter, it’s become clear that fintech is undergoing a transformation because its consumers are demanding higher standards. As a result, while I cover major fintech trends, I delve much more deeply into the stories of individuals effecting change in the space as entrepreneurs and consumers. Fintech might not come across as the most glamorous industry, but it’s arguably one of the most impactful, touching everyone’s everyday lives.
For those of you who can’t find time to read the full 40 pages (although it’s a good fall afternoon read) here are some key insights from my fintech chapter:
More data as well as better and lower-cost technology has led to innovative applications. More data enables companies to better understand consumers and market conditions to optimally price their products. As cloud technology has exploded onto the scene, lower technology costs enable companies to extract more insights from their data and empower more of the population to incorporate technology into their daily lives.
The 2008 financial crisis set the stage for fintech innovation. Most Americans felt the crisis’ wrath through unemployment, reduced paychecks, lower home values, or overall lack of financial stability. Many continue to feel the crisis’ consequences, leading to lack of trust in financial institutions. Through all this, financial incumbents retreated from consumer markets to lower costs and comply with new regulations. The loss of customer trust and retreat of incumbent institutions created a window for fintech startups to emerge and capture market share.
Successful fintech startups tend to have the following characteristics:
Technology-first approach: Employing a technology-first approach enables companies to move many processes online and make them more streamlined.
Big data as a strategic imperative: Fintech startups are employing the latest big data, artificial intelligence, and machine learning technologies to better understand their consumers, predict behavior, and optimize their businesses.
A hybrid model using automation and people: As prevalent as automation has become, being able to speak with a human can be comforting to consumers. Money is personal and people need to have full confidence that their money is safe.
A clear and transparent mission: A well-stated mission that’s morally aligned with consumers in addition to clear, transparent pricing are major selling points for consumers.
Partnerships between financial institutions and fintech startups are crucial. Financial institutions need innovation and data-driven technologies, which startups can offer. Fintech startups need capital, data sets, and customer acquisition channels, which incumbents can offer. Together, they offer each other strength and momentum.
Challenges in fintech are high stakes. There are two major challenges the financial industry as a whole is grappling with: the regulatory climate and data security. It is more time consuming and expensive to work within the boundaries of compliance, but if fintech companies don’t, they risk getting shut down. Security must also be a top priority. Security breaches tarnish brands and consumers are becoming increasingly aware of data breaches. They want financial institutions to be trusted partners in protecting their data.
It’s been an honor speaking with some of the biggest names in fintech who helped me dive deep into the complex and intricate world of fintech. Huge thanks to Sallie Krawcheck, David Klein, Shivani Siroya, Spencer Lazar, Matt Harris, Steve Lekas, Brendan Dickinson, Jon Stein, and Brian Hirsch for their valuable insights and to Kunal Mehta for inviting me to write this chapter for Finding Genius.