What Is Fintech? And Why Is It Disrupting the World of Finance?

By Deepak Ramachandran

Let’s face it, “FinTech” means a lot of things to a lot of people. It may be a term for any financial technology or an entirely new kind of company with a particularly disruptive mindset. But ultimately, true fintech is and should remain a disruptive force.

So let’s get into it. What really is fintech? How are companies using this label to revolutionize finance? And why might you want to join in?

Disruption Is the Key to Good Fintech

A key distinction drawn by some writers on the subject of fintech is the disruptive element. As we see it, providing enhanced technological products to existing financial institutions just doesn’t cut it. What matters is to what end the technology is used. Ultimately, it should be used to ditch the entire system, with all its flaws, and do things in a way which has the potential to make the titans of finance spit out their morning coffee.

But the kind of messes these new fintech startups are trying to create aren’t the kind your maid can just clean up. Ideally, they should be the kind which force huge financial institutions to reform or perish. In other words, if a company isn’t seeking to innovate outside the system, they’re missing the point of fintech.

So when bloggers say things like “the currently held definition of FinTech is not only stale, but also unrepresentative of the opportunity in this industry,” they’re right. “Any finance-based service” is not effectively representing the fintech mission.

But even Karl Antle’s new definition of fintech, “technology that serves the clients of financial institutions, covering not only the back and middle offices but also the coveted front office that for so long has been human-driven,” is in many ways just as stale. But why is it important we get the definition right?

Build a Fork in the Road and Take It

Technology is taking the world in two directions at once in a process which can feel incredibly schizophrenic. It’s both making us even more deeply connected to massive and powerful institutions of all sorts and giving us innovative tools to fight back. It’s as if technology took Yogi Berra at his word, built a fork in the road, and took it.

Fintech embodies this phenomenon, with some appropriating the word to attract young entrepreneurs to build deeper relationships with major investment banks, while others write it on banners and use it as a battle cry to fight those same banks. With fintech companies becoming more prominent in the startup world, it’s important to understand the difference and know who you’re working with.

Drawing Lines, Pointing Fingers

Let’s look at some examples from a prominent Forbes article. Companies like BillGuard and OnDeck are empowering users to see through the smoke and mirrors of huge institutions, or even better, to circumvent them entirely. Others, like Stripe and Epiphyte, seek to further customer integration into the existing financial system.

See the distinction?

Here at FundThrough, we could have addressed working capital financing and invoice discounting by making it easier for customers to find short-term bank loans to get them through their accounts receivable gaps. But instead, we go outside the banking system to provide innovative financing tools on our own terms. In the end, our clients benefit from more and better options.

Now's the Right Time to Jump in

So now that you’ve got a better idea of what fintech is all about, take a look at some of the FinTech success stories, get inspired, and get involved. Whether you just want to use fintech services, or start your own innovative fintech company, it’s time to jump into action since financial giants aren’t going to disrupt themselves.

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