Jun 08, 2016 Sean Albert
As we noted in a previous blog, financial technology is surging. Fintech companies are using big data and other resources to develop more efficient, effective approaches to a wide array of finance-related activities. As TechCruch contributor Jan Hammer recently noted, fintech startups aren't eliminating traditional banks, but they do pose a serious challenge and are forcing these older, larger financial institutions to adapt.
With more fintech startups popping up all the time, businesses have never had more options for their financial needs. That's obviously a good situation for companies eager to find the best services at the best cost. However, there's also a major downside here: Not all of these fintech startups are created equal. In fact, there are many fintech firms in this increasingly crowded space that are simply not sufficiently reliable or capable of delivering what they promise.
For business leaders to benefit from fintech's expansion, they need to exercise caution and choose the right partners.
Expansion and confusion
A big part of the problem for businesses evaluating their fintech options is that the success of startups has created a great deal of chaos and confusion. Consider, for example, how broad and wide-ranging the fintech space truly is: An O'Reilly survey of 18 fintech competitions and hackathons found that 18.8 percent of winners were in the data space, 13.4 percent focused on lending, while 13.4 percent were payments and 11.3 percent small business solutions providers, and that only accounts for only a bit over half of the winners. That goes to show how fintech's impact on the entirety of the financial services space. What's more, 14 percent of these winners were categorized as "other," suggesting that the lines between these services are blurring.
As a result of such a high degree of diversity and speed of growth, it is not always clear how these various fintech firms can or should be regulated. A Silicon Valley Bank survey of fintech firms found that regulatory hurdles were the biggest challenge for companies in this space, cited by 43 percent of respondents.
Speaking to The Wall Street Journal, Bruce Wallace, chief digital officer of SVB Financial Group (the parent of Silicon Valley Bank) noted that the issue isn't problematic specific regulations, but rather ambiguity and confusion. He pointed out that while it's usually quite clear what agencies regulate an established financial institution, that's not the case for fintech disrupters.
That's not just a problem for the fintech startups - it's also a major concern for any business leader who wants assurances that his financial partner will be fully and adequately regulated.
"The only way to balance results with caution is by looking at results over time."
The right partner
In light of this state of affairs, the safest option for wary businesses interested in fintech's potential is to choose a well-established fintech company, such as MicroBilt. Unlike the vast majority of fintech firms on the scene today, MicroBilt has been a leader in the fintech space for more than 30 years, leveraging #smartdata and innovative strategies to provide nontraditional credit and other alternative financing solutions to our clients.
In a field as confusing and fast-evolving as fintech, the only real way to balance results with caution is by looking at providers' results over time. Many fintech startups are making tremendous promises, but in a confusingly regulated space, there's simply no replacement for history when evaluating your options and finding a trustworthy partner.