FinTech’s Expanding Opportunity to Make Banking Better

By Theodora Lau and Bradley Leimer of Unconventional Ventures 

What will the legacy of technology’s influx into banking be on the financial services business model? Has the banking industry and associated financial underpinnings changed enough to truly serve the needs of our diverse global community? Or will we continue to see the same focus on high-margin profitability and growth focused on the same customers in the same communities across the same geographies? 

The times have changed — or so it seems.  

This past decade has seen banking turned upside-down. But is it enough to change an industry for good? There has long been hope that this new force of ideas, funding, and focus — sourced from fintech startups, large technology firms, and across new value propositions — would help democratize banking accessibility to provide meaningful benefit to often underserved and underbanked portions of our global population. But there is much more work to be done — to meet the needs of those not yet banked and of the majority of customers whose finances and economic conditions are still far from optimal.  

The banking industry could do so much more (and as we talk extensively about in our book, Beyond Good, they have more than had their chance to adapt to the changing tides). 

A more inclusive model emerges 

Just as we should have an expectation of safe and sustainable communities, we must continue our efforts to achieve real and lasting global financial inclusion. Our collective goal should be to ensure that everyone has access to basic banking services — whether they are performed at an incumbent or a fintech startup — as well as ways to optimize the value of money in our lives. 

Things have improved on this front. In just the past six years, the percentage of banked adults globally have gradually increased: from 51% in 2011 to 62% in 2014, and 69% in 2017, with a total of 1.2 billion people worldwide having gained access to bank and mobile-money accounts. While this is tremendous progress, there are still 1.7 billion people unbanked — about 22% of the global population, half of which are concentrated in seven nations — China, India, Pakistan, Indonesia, Nigeria, Mexico, and Bangladesh. 

Yet the march toward this lofty goal of total inclusion continues despite the pandemic — and in many ways because of it — across not just these countries but throughout every global market. One thing has become very clear: From Ant Group to Zest Financial, it’s been financial technology companies leading this charge. And incumbent banks see this as a threat to the established business model. 

The mighty march of fintech  

A cambrian explosion of fintech funding — starting with the leadup to the Great Recession in 2008 — has created thousands of fintech startups focused on diverse financial needs. Together with big tech, they have certainly changed the financial services landscape, with banks playing an increasingly smaller role. Jamie Dimon lamented this week in J.P Morgan Chase’s Annual Letter to Shareholders: 

“Fintech companies here and around the world are making great strides in building both digital and physical banking products and services. From loans to payment systems to investing, they have done a great job in developing easy-to-use, intuitive, fast and smart products. We have spoken about this for years, but this competition now is everywhere. Fintech’s ability to merge social media, use data smartly and integrate with other platforms rapidly (often without the disadvantages of being an actual bank) will help these companies win significant market share.” 

But are most fintech startups really disrupting the old business models? Or simply re-creating them with a new technology and new customer experiences? As measured by financial access to payments and credit yes, but what about improving the financial well-being of more members of our society? 

Inspiration for a new value proposition  

When we think about the way money moves and what it can do today, it wasn’t that long ago that much of what we now take for granted in banking wasn’t available or as easily accessible to the majority of customers. For the mass market — the middle class of banking’s customer hierarchy — traditional banking has been largely static, which is why these new technology focused models are so disruptive. 

With the reduction of fees, early access to payroll, more flexible credit options, a focus on increasing income opportunities, and new automated ways to save and invest, the fintech revolution of the business model has been a tremendous shift in favor of the consumer. But there is much more work to be done. And much more focus placed on business outcomes that are positive solutions for more of our society. 

Technologies such as cloud and artificial intelligence have allowed us to not only tap into data more efficiently, but also to make use of it more effectively to draw useful insights to better serve our customers. With more fintech startups being founded and funded every day, and leveraging these new technologies to focus more on building value than chasing purely profit, it is the most exciting time to be working within financial services — because of the positive impact we can collectively have in the world. 

Where else would you rather be?  

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While few would disagree that financial inclusion is an inequality in our modern day society that still needs to be resolved, and that improving economic prosperity of everyday people is an attainable goal that we should all aspire to — we might not always agree on the path to get there. If we have learned anything from the fintech boom, it’s that having access by itself isn’t enough. Perhaps part of the puzzle piece lies with the movement of money, and how we can best leverage technology to automate our decision making.

In this episode of One Vision, Theo and Bradley chat with Chris Hutchins, Head of Autonomous Financial Planning at Wealthfront, on self-driving money, and what’s next for democratization of financial services. Listen to this great episode on Apple Podcast, Spotify, and All Players. 

Please consider hitting that subscribe button and leaving us a review. Sponsorship opportunities for this season of One Vision are available. Visit unconventionalventures.com to learn more about partnerships.

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Our new book, Beyond Good, is now available for order at Amazon, Barnes & Noble, Kogan Page, and everywhere fine books are sold. Keep in touch with our book launch events at BeyondGoodBook.com.

Beyond Good is a call to arms for business leaders to recognize how they can do well by doing good. Business for good, which is the philosophy that you can pursue profits while delivering on sustainable and societal development goals, is already delivering big changes. With exclusive interviews with experts from the B-Corp world, policy makers and executives, this book also showcases how companies like Microsoft, Flourish Ventures, Ant Financial, Sunrise Bank and Paypal are doing their bit to make our world better — and you can too. Beyond Good is also available at Bookshop.org (supports local, independent bookstores), Waterstones, WHSmith, and everywhere books are sold.  

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Unconventional Ventures helps drive innovation to improve systematic financial wellness. We connect founders to funders, provide mentorship to entrepreneurs, strategic advisory services to a broad set of corporates, and broaden opportunities for diversity within the ecosystem. Our belief is that anyone with great ideas should have a chance to succeed and every voice should be heard. We work with financial institutions, fintech startups, technology firms, and corporates working within financial services and tangential verticals. Visit unconventionalventures.com to learn how you can partner with us.