Old Money Seeks New Solutions, Financial Institutions Pursue FinTech Startups
The digital revolution has not skipped over one of the oldest industries in the history of man; finance.
Since the financial crisis of 2007, the financial services industry has undergone rapid transformation, primarily focusing on reducing overall expenditures and maximizing profit with a reduced workforce.
Despite the fact that the financial world was crumbling, global financial services continued to invest in financial technology, increasing global expenditure in 2014 to $12 billion (up from ‘just’ $930 million in 2008) and is expected to pass $20 billion in 2016. This statistic goes hand in hand with the Millennial Disruption Index (MDI) assessment that over 70% of millennials, the primary consumers of financial services, said they anticipate financial service innovation more than they anticipate innovation from their own banking provider.
To meet the demands for rapid change by the new generation of professionals, financial service enterprises have increased expenditure on financial innovation, drastically transforming a profession that remained relatively unchanged for hundreds of years.
The enterprises that were hesitant to accept the digital revolution now find themselves seeking solutions from startups operating in the financial technology world.
How Enterprises Test Scalability of FinTech Startups
In the past, enterprises had a difficult time seeking new innovations, particularly because the field was not yet developed and the only thing that made headlines in the financial industry was the continued decline of the financial bubble and increased unemployment.
Luckily for enterprises, today there are more ways than ever to connect with startups and explore new innovative technologies in the financial services; from meetups to tech groups, startups in the financial sector are everywhere.
Despite the fact that enterprises are actively seeking startups with new game-changing innovations in finance, as startups are eager to prove their concept to enterprises, few startups reach the point where they actually test their technology on the ecosystem of enterprises.
The reason for this is a complex one resulting from years of cumbersome red tape and bureaucracy, fear from the enterprise side to provide access, and lack of coordination in terms of measurement and assessment of pilots. Simply put, enterprises are weary of granting startups access to their secure ecosystem, and to do so often requires more hassle than it is worth – especially if the pilot is unsuccessful.
The introduction of the prooV piolt-as-a-service platform has radically altered this state of stagnation with the simplification of the PoC process. prooV has quickly established itself as the only pilot-as-a-service platform that offers a simple solution for the complex needs of enterprises and startups, particularly in the field of finance.
The prooV platform gives enterprises unlimited access to innovation with just a single sign-on secure cloud integration. Once enterprises integrate with the prooV marketplace network, unlimited startups can test their technology on the enterprises ecosystem, thus expediting the introduction of new technology into the market.
SaaS companies have been on the rise for the past few years so it is only natural that pilots, like software, be offered as a service. prooV is able to help startups that otherwise would not have been able to connect to certain enterprises, and simplifies the way enterprises evaluate and explore new technologies.
Where Is FinTech Going?
Financial technology and innovation has steadily increased in popularity, with FinTech startups racking in over $2.29 billion in 2015 alone. The future of FinTech seems to be digitalization and mobile payment, with most of the FinTech innovations operating in that realm.
Banks, the epitome of the financial institution, have been steadily shifting the way in which they provide customers with service and preparing themselves for the modern digital revolution by increasing the reliance on technology steadily throughout the years. Despite the financial boom preceding the crash in 2007, from 1990 to 2015 the number of banks increased but the numbers of tellers decreased by almost 50,000, with many banks today shifting to teller-less banks and a completely digital experience.
Relying more and more on technology is a common thing for modern professionals, as is the shift away from ‘cold-hard cash’ – a movement that further drives financial innovation and has the potential to crumble enterprises. An ICBA study on millennials and banking revealed that nearly 25% of all millennial carry less than $5 cash on them on a daily basis and over 70% place mobile banking experience in high priority for them.
With the expectation that millennials will demand more and more innovation and enterprises will be able to validate and scale new technology faster than ever, one can only expect more game changing financial innovations to hit the financial service market in the upcoming months.