Banking as we know it, is one of the oldest industries since time immemorial.  Savings were safeguarded, bank managers were your friends who helped you with your mortgage and were there to help your finance.  Things have changed and changed hugely.  From complex derivatives to bond trading where people with a PHD in applied maths can grasp transactions, banking is become increasingly complex and as such technologies have developed with it to where a new world has been developed to encapsulate it and that is Fintech.  Short for Financial Technology, it’s essentially a revolution of new technologies disrupting the financial world and banking as we know it.  From payments, wealth management, lending, payment systems, automation to insurance and it is here to stay.

The actual word  fintech is  not new and has been round many years however it id literally attracting billions form angel investors and start up funds and  a cool $20 billion of investment was invested into the fintech  up nearly 2000 % from 5 years ago.

The objective of all these new technologies is to compete and disrupt the  biggest players in finance.

A few examples are already very well established and it wont be long before they are global brands and household names. For example  Stripe, the payments company, are competing with  the likes of PayPal and are offering a different service . People it seems are drawing to them on the back of huge complaints with how Paypal operate their business.And this is exactly how it is going . Fintech start ups are going against the monopolies that the banks and payments providers once had . And they have the backers with the financial clout to compete against it

Other great examples are the Lending club who are trying to  make it easier and cheaper to obtain loans. Wealth front wants to advise you and manage your money from your phone. And, of course, Bitcoin wants to become the new digital wallet. Adyen is an international payments processing company that counts Uber, Spotify and Facebook among its clients and was founded in 2006 and offers payment services on desktop, mobile and in-store.

Payments is an increasingly crowded sector with competitors including Stripe and Braintree however Adyen has some high-profile backers including Mark Zuckerberg and is being currrently valued at 2.3 bilion.

TransferWise is a peer-to-peer money transfer service described by the FinTech 50 panel as one of the “original fintech revolutionaries”.The London-based firm allows users to transfer money across different borders and currencies at lower costs than traditional banks and is currently valued just under 2 billion.Nutmeg is another and is a British start-up is an online wealth manager which is regulated by the U.K.’s Financial Conduct Authority (FCA).

With these new technologies could see up to 30 percent of jobs eliminated from the banking industry, Citigroup said in a study published last week, highlighting the threat to traditional companies.

How real is the threat?

Although fintech may be on the cusp of a huge trajectory the offset is that  over the next ten years 700,000 people will lose thier jobs s a direct result of fintech  .Although  technology advancements and Silicon Valley startups are driving much of the industry’s change some experts firmly believe banks will remain on the centre of things.In addition  nonbank fintech firms still have a lot of ground to make up in relation to banks in a number of significant areas. One in particular is customer awareness. Also less not we forget the billions banks have in reserves , Banks’ sales force and customer service infrastructure are huge and very importantly banks have huge data  — hisotrical big data.

In addtion the  fintech craze is still  new , there is still not evidence to suggest they will stay around for the long term

A  very important factor is that the big bank so ecompassing and  powerful  on the back of the hysteria of it all will  in a spate of mergers and acquisitions just buy them up making tehem part of the instution these fintech wanted to voer take

Examples of this can already be seen with  JPMorgan Chase’s recent alliance with OnDeck, an online lending platform for small businesses. Rather than compete and squash OnDeck like they have done to competitors JP Morgan simply JPMorgan became OnDeck’s “partner.” It has been couched as an early joint venture.

Nobody quites knows how this will work out  .Even the mostbiggest fntech companies are still tiny. OnDeck is worth about $500 million; JPMorgan’s market value is $214 billion.

Others include Banco Santander and Monitise (LSE: MONI) announce a joint venture agreement to launch a fintech venture builder later this year. The 50:50 joint venture will be aimed at investing in, building and scaling fintech businesses with the potential to redefine and support financial services globally.

The joint venture will invest in fintech businesses which will benefit from the opportunity to become partners with the largest bank in the euro zone by market capitalisation with a meaningful presence across Europe

The crucial question for the fintech industry is whether these businesses can grow fast enough while maintaining a disciplined approach and navigating the thicket of regulatory hurdles that very likely will stand in the way. Silicon Valley has long shunned regulated industries, but having conquered so much of the landscape in other industries, it is now turning to finance.

Which perhaps may be the most compelling reason for why there is probably going to be a wave of deals among these companies soon. With the cost of compliance so high and many large institutions already having built an enormous compliance infrastructure — the big banks now employ thousands of lawyers — it will only make sense for smaller upstarts to end up as part of a bigger company.

“Some banks will be smart and figure out how to partner with some of these entrepreneurs or acquire some of these companies or do joint ventures, but if they just think it’s going to stay the way it is, they will be surprised,” Mr. Case added.Source NY times