“Silicon Valley is Coming.” Warned Jamie Dimon, the CEO of Morgan Chase, in a shareholder’s meeting in April 2015. He was talking about Financial technology, Fintech for short.
Fintech is a line of business based on using software to provide financial services. The National Digital Research Center in Dublin, Ireland, defines financial technology as “innovation in financial services”. It refers to new solutions that demonstrate a disruption in the way financial business is done.
“Fintech is a portmanteau (large traveling trunk) of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions. Since the end of the first decade of the 21st century, the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies like bitcoin.” Per Investopidia.
Those startups are offering specific technology solutions to make the process quicker and more secure, based on a complete profile of the applicant as it is pulled from big “data”. When assessing someone’s credit worthiness, for example, a more detailed profile emerges. Using metrics, the program will determine the person’s eligibility within minutes.
In Europe, more than $1.5 billion was invested in financial technology companies. London takes the lead with over $500,000 in startup investments. Amsterdam-based companies received $306 million.
Global investment in financial technology mushroomed from $930 million in 2008 to $12 billion in 2014. In the US, there are a small number of startups that deal with fintech, but the number is growing. You might have noticed two commercials in Super Bowl 50. One that promised to approve you for a mortgage from your phone, and another by a company in San Francisco called Sofi.
On Dec.1, 2015, JPMorgan Chase announced a partnership with OnDeck Capital, a publicly trades fintech lending company. This represents the highest profile bank entering this market.
Noah Breslow, CEO of OnDeck, said in a press release, “OnDeck is working with Chase to build a new Chase lending product that will provide online loans to their small business clients. By combining Chase’s relationships and lending experience with OnDeck’s technology platform, Chase will be able to offer almost real-time approvals and same or next-day funding.”
The target customers for fintech technology are business to business (B2B), business to consumer (B2C) and consumer to consumer (C2C).