Fintech is Getting Wavy

Tech company looks to expand and forge new ground


That’s right! According to Goldman Sachs, Fintech is about to enter the third wave of the industry’s development. This framework was laid out by Goldman Sachs’ Jeff Gido, Global Head of Fintech. According to him there is a first wave in which there is an influx of new technology, regulation, and changing customer likes and dislikes. The second wave, which we are believed to be in right now, is one in which “incumbents are using their brands and infrastructure to remain competitive with the startups.” The third wave is one in which fintech firms are focusing on B2B sales and partner with traditional firms while holding a loyal customer base with building technology.

Fintech has changed the battlegrounds for financial companies. It is the blend of finance and technology, with many new players. Older companies are starting new initiatives to not be left behind. Goldman Sachs starting an online bank in order to reach a new demographic. Additionally, PayPal has led Series B funding on Acorns and Blackrock bought Betterment for an undisclosed amount. Every bank within the bulge bracket is revolutionizing their business framework to block chain, that will save them billions.

New companies are proving to be competition for the older players. Recently Lemonade launched their service which is a renters and home insurance service, p2p. Many other companies are starting services that work p2p as well, such as LendingClub and LendingTree for small loans. Some people on the creditor side can see gains from fixed income that are high yield like equities but don’t hold the high risk. There are many more and countless small ones. Right now banks are not too intimidated by the new players. A lot run out of business, out of cash, fall out of style, into other problems, and more. After a round of survival of the fittest and a profitable service with a high number of users, a big company with a lot of cash will buy them out. Intuit in 2009 bought Mint for $170 million, a personal finance app. Right now the newer companies aren’t necessarily running at a point where they are profitable or can compete in the big leagues. One banker of Wall Street sees little potential threat except in the market space of foreign currency exchange. This is a big market with a lot of unhappy customers due to the insanely high exchange fees. Transferwise is aiming to change this with their service, it is similar to the Venmo of foreign currency. You make a transfer from your bank into the currency of your choice, at the current exchange price. The fee is a flat $3 for transfer up to $300, 1% for $5,000, and .7% for 5,000+. Recently the company has been valued at $1.1 billion. This is a unicorn outside of the valley, and part of the U.K. group.

The finance sector may see further threats from tech companies and fintech startups but are currently monitoring the market in what they see is a soon third wave of fintech. Some unicorns are popping up with valuations over $1 billion, and the question is which startups will be major disruptors. Some may be goliaths that can survive on their own and others eaten up in acquisition offers. By 2018 there will be an estimated $8 billion in fintech global investment.