As a developer, how familiar are you with ‘Fintech’ and the opportunities it presents? It’s an area that’s seen phenomenal growth over recent years on the back of new regulations designed to open up the banking sector to increased competition, and also as banks finally wake up to the need to address the challenges of digital disruption.
The growing interest and investment in the sector have led to the word Fintech now being included in the Merriam Webster dictionary for the first time:
Fintech (noun): products and companies that employ newly developed digital and online technologies in the banking and financial services industries.
But why has the word Fintech, the usage of which dates back to 1971, only entered the dictionary now? What opportunities are available for Fintech developers, keen on a career in this sector?
Global interest and investment
The fact that Fintech is proving to be a lucrative business sector is certainly a key driver behind its rise in prominence. In the first half of 2018 alone, VC-backed Fintech companies reportedly raised over $25 billion (£19.3 billion) in funds.
CB Insights’ data shows there are currently some 29 Fintech unicorns (venture capital-backed, private businesses worth over $1 billion (£775 million ) worldwide, with an aggregate value of $84.4 billion (£65.4 billion) – and this is expected to keep on rising.
Perhaps owing to the fact that Fintech is already generating a huge amount of wealth, they are also receiving an unprecedented amount of political support. Globally, multiple jurisdictions are vying for Fintech hub status.
From the UK to Hong Kong, from Germany to the US, governments are offering financial support for Fintechs, via tax incentives and grants.
Educational support is also being offered, with academia and financial firms collaborating to create Fintech-related graduate training schemes and degree courses.
A number of recent events in the financial services space are also helping to fuel the rise of Fintech. The European Union’s second Payment Services Directive (PSD2) and the UK’s Open Banking initiative, driven by the UK Competition & Markets Authority, are opening up the financial services market to new players – loosening incumbents’ iron grip on their customers and customer data.
Not only are banks now compelled to share data with trusted third parties at the request of their customers, if they want to build long-term relationships with customers in the digital age, but it’s also in their interest to take a more open and collaborative approach.
As digital-first customers’ expectations around products, services and customer experience grow, banks and financial institutions are realising that they must find a way to provide innovation at pace, otherwise, they’ll lose their competitive edge.
This is where there’s a great opportunity for Fintech developers and firms to work with the banks to deliver new, added-value products and services that customers crave.
How to engage the banks
You may well be asking, how does an independent developer or small Fintech engage with a large bank and monetize their idea for a new banking app? Long lead times, complex procurement processes, extensive approval, testing and user acceptance cycles are all barriers to entry that surely only those Fintechs with very deepest pockets can sustain?
Not necessarily. Finastra recognises the challenge faced both by the banks and also by the Fintech and developer community. Our recommendation is for banks and Fintechs to adopt a Platform-as-a-Service (PaaS) approach. The ability to collaborate through a common platform, hosted in the cloud, offers the potential for Fintechs to reduce application development time from months to weeks.
Users can bring innovation to market faster using a low-code, cloud environment, and sell applications to the banks without needing to build a global sales team or worry about a scalable infrastructure. Pre-integrated developer tools, a sandbox environment, and an API catalog can also speed application creation.
As the model for bank innovation changes, a platform approach also makes it easier for financial institutions to transform their businesses, extend product capabilities and access innovation.
Banks can leverage their own development capabilities to create and deploy applications on top of their core systems and can collaborate with Fintechs to build and access new capabilities they need quickly through Open APIs.
Imagine the ability to make your apps available to banks globally through a digital shopfront that works much like Apple’s iOS App Store. That’s a key part of the PaaS approach: providing a simple way for developers and Fintechs to distribute and monetise the apps while making them as easy as possible for banks to test and deploy.
Filling the skills gap
As financial institutions increasingly recognise the value of an open platform approach in speeding up the opportunities for collaboration with Fintechs to enhance their current services – so the demand for skills and new apps in this space increases.
And it’s not just in retail banking that the opportunities lie, but across all areas of financial services. Just as consumers in the digital age come to expect more of their retail banking service providers, so too do executives in business to business roles spanning investment management, corporate banking, payments, trade finance, capital markets and more.
There’s huge scope for innovation across all areas, and great earning potential for those with the ability to convert good ideas into innovative apps and services.
So here’s a call to arms for developers. Fintech needs you, the banking industry needs you and, most importantly, the customer of tomorrow needs you! Feel free to get in touch if you want to learn more.
Written by Mitesh Soni, Senior Director, Innovation and Fintech Ecosystems, Finastra