In just a few short years, technology start-ups have radically transformed traditional models of communication and consumption. Now, they’re disrupting long-standing models of banking, lending and investing by changing the way we access the financial marketplace.
The August 3 edition of The Economist featured a story profiling the scrappy financial technology start-ups shaking up the world of lending. Firms like Xoom, Lending Club and Wonga are enabling consumers to borrow and send money outside of the traditional methods that banks allow. Through web- and mobile-based technology, these companies are able to make intelligent decisions, collect funds and send them to recipients quicker than it takes for a bank associate to ask them how their day is going.
By cutting financial institutions out of the consumer lending chain, these financial technology start-ups are capitalizing on flaws in the traditional lending model. It’s no secret that consumers are fed up with paying fees for low-touch service. But since 2008, many of these individuals have been underserved or ignored completely, as major banks have tightened their lending.
The same story is being played out across the financial markets. In areas like retail trading, for example, financial technology firms are using social media to harness market intelligence from burgeoning volumes of data and by tapping into the collective power of networks. As a result, consumers have easier access to investment expertise or the watchful eye of a seasoned trader or fund manager without excessive costs.
We see it firsthand through our clients who are bringing their own form of disruption to financial services:
- DCM Capital – launched the first trading platform with a social media sentiment feed
- eToro – a social trading network allowing users to share and copy trades
- FIG – a venture capital firm investing in the businesses of students and recent graduates
- Knowsis – a firm mining social media for intelligence to enhance trading strategies
- Maxxia – a firm looking to transform the asset financing market through transparency
The growing momentum of these businesses is evident in the quality and quantity of media attention they’ve received. This year alone, our ‘scrappy start-ups’ have been featured in the BBC, Bloomberg, Wall Street Journal, The Times, FOX News and the Daily Telegraph.
While we’re still some time away from seeing the long-lasting impact that these firms will have on the financial services industry, there’s no denying they’re bringing much-needed change to a marketplace that demands it.