Wednesday 22 March 2017 2:29 pm IDA Ireland

How banks are benefiting from fintech innovation

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Digital disruption powered by nimble startups has bitten at the heels of many large financial organisations, but now the banking behemoths are striking back.

Fintech’s first wave was all about new names targeting businesses and consumers with services like money transfer, foreign currency exchange, and even loans. We now live in a world where Apple, a company best known for making a smartphone, could conceivably become a bank. Last year, the UK saw the launch of several challenger banks including Atom Bank which began offering savings and followed up with mortgage services. More expansion is expected during 2017.

Powering expansion

Global tech sector giants are also set to engage more in fintech opportunities. The Chinese ecommerce giant Alibaba Group is said to be targeting promising companies in the fintech space as part of its global expansion plans.

Fintech investment

All of this adds up to a very vibrant sector. According to KPMG, venture capital funding to global fintech companies reached a record $13.6bn in 2016 and overall investment in fintech companies totalled $24.7bn.

Enabling competitiveness

Now, it seems financial providers are looking to reclaim the ‘fin’ in fintech. As the technology matures, traditional financial services companies are embracing it because they see the possibilities for improving their internal business processes, saving costs and making themselves more competitive.

“The general narrative two years ago was that fintech was synonymous with disruption, and that banks are dead. That has really changed: now, the majority of fintech companies are not disrupting, they’re enabling – and that’s a very interesting dynamic,” comments Keith Fingleton, chief technology advisor for financial services with IDA Ireland, the inward investment agency.