What do you think when you hear the word “fintech”? It’s been around for almost five decades, yet it has only just been officially recognized as part of the English language. In the Merriam Webster dictionary, the word is defined as: “Products and companies that employ newly developed digital and online technologies in the banking and financial services industries.”
A number of factors in recent years have paved the way for the boost in profile for fintech, bringing about phenomenal growth in the sector. In some parts of the world, governments and regulatory bodies have fueled this growth by issuing regulations that open up the banking sector to increased competition, creating a great many opportunities for finance and technology professionals alike. And from the other side, not only are banks being at most compelled, and at least pressured, into opening up to competition, many are now actively seeking to collaborate with more agile third parties—namely fintechs and developers —to innovate the services demanded by their customers.
So, what exactly are the opportunities available for developers in this newly defined sector?
From the Classroom to the Boardroom and Beyond
I am confident that there has never been a better time than the present for developers to get involved in the financial services industry. It’s a bold statement, but one that bears out when the remarkable amount of support being directed at fintech is considered.
Today, the industry is receiving unprecedented political backing as multiple jurisdictions vie for fintech hub status. From the United States to Hong Kong, from Germany to the UK, governments are offering financial support via tax incentives and grants in a bid to woo fintechs and developers to their financial centers. And it’s no wonder, given how lucrative a business sector it has proved to be. In the first half of 2018, VC-backed fintech companies reportedly raised more than $25 billion in funds. CB Insights’ data shows there are currently some 29 fintech unicorns (venture capital-backed, private businesses worth more than $1 billion) worldwide, with an aggregate value of $84.4 billion—and this is expected to keep on rising.
Even educational support is being offered to future-proof against skills shortages, with academia and financial firms collaborating to create fintech-related graduate training schemes and degree courses.
Around the world, particularly in Europe and parts of Asia, governments and industry bodies are lighting the way for a new approach to collaboration with fintechs and developers. In Europe, the second payments Services Directive (PSD2) and the UK’s Open Banking initiative are opening up the financial services market to third parties eager to enter the space. These initiatives, and others like them, compel banks to share their precious data with third parties at the request of their customers—meaning they can no longer take their hitherto market hegemony for granted.
Here in the United States, the Consumer Financial Protection Bureau (CFPB), the body that regulates the offering and provision of consumer financial products and services, has released a set of data sharing principles that provide an advisory framework for financial institutions. Though the CFPB’s guidelines are non-binding, they do show that there is growing pressure from regulators for the financial sector to be more transparent with customer data.
Collaboration is Key
When it comes to collaboration between fintechs and banks, one might expect there to be a certain amount of resistance from both sides. Fintechs are traditionally disruptors, while financial institutions don’t take kindly to being disrupted. A pPlatform-as-a-service (PaaS) approach can help enable collaboration that is beneficial for both sides.
The ability to collaborate through a common platform, hosted in the cloud, offers the potential for fintechs to significantly reduce application development time, often from months to weeks. Users can bring innovation to market at pace 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 catalogue also speeds application creation and levels the innovation landscape. With platforms, the fintechs with the deepest pockets no longer dominate the market simply because they have the resources to snap up opportunities. In the platform sandbox, smaller firms, startups and independent developers can bring their own offerings to the table.
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.
A key part of the PaaS approach also gives developers the ability to make apps available to banks globally through a digital shop front, much like Apple’s iOS App Store. So, not only are developers and fintechs able to distribute and monetize their apps, banks can readily test and deploy them.
Financial institutions are starting to recognize that an open platform approach is the fastest way to onboard fintechs to enhance their current business offerings. As this understanding deepens, so too will the demand for skilled professionals and new applications. Banks in the not-too-distant future will not only concern themselves with the services they want to deliver, much consideration will be given to the fintechs most able to provide them in a timely manner.
It’s not just in retail banking that the opportunities lie, but across all areas of financial services—from investment management to corporate banking, payments, trade finance and capital markets. The coalescence of these two considerations is leading to a change in the industry zeitgeist, meaning the scope for innovation across all areas has widened significantly. The great earning potential for those with the ability to convert good ideas into innovative apps and services has never been more apparent.
So, developers, as banks wait with open arms (and APIs), now is the time to enter the burgeoning world of fintech.