The Four Players Creating the Next Era of Fintech

Traders Magazine Online News, May 24, 2017

Ralph Achkar

The fintech world is rapidly moving, and the pace of innovation is only accelerating more every day. With capital markets becoming increasingly competitive, and traders within and across different markets looking for solutions that will provide advantages and facilitate access to new liquidity, it’s no surprise that the demand for intuitive and effective fintech solutions is sharply on the rise as well.

The importance of the capital markets to economies around the world means there are many different stakeholders with vested interests in how fintech solutions are developed and deployed. Startups, banks, governments/regulators and infrastructure providers all play distinct, vital roles in how the future of fintech is being shaped – and, ultimately, it’s their working together that will yield the most fruitful solutions.

The Banks

Fintech – and, for that matter, any game-changing technology – can’t get anywhere without a good community of adopters. That’s where banks come in. Many of these firms, including American Express, Goldman Sachs and JPMorgan Chase, have either invested directly in fintech providers, or acquired these providers and integrated them into their own operations as an in-house ideas lab. Naturally, these aren’t completely selfless ventures – fintech solutions, like money transfer applications and FX applications, provide promising new ways for banks to refresh how they do the things they already do.

Whether banks invest in fintech startups or buy them for their own use, what they’re looking for remains the same: new business models that offer opportunities and provide an edge over the competition.  Before they can do that, though, banks have to take their cues from the government and regulators.

The Government Regulators

Politicians and regulators play a key role in encouraging fintech. For one, they set the rules by which fintech solutions are allowed to grow and be applied to capital markets. Consider the White House’s A Framework on Fintech, for example, or the U.K. Financial Conduct Authority’s guidance on cloud use. They take a wide, stability-focused view of capital markets and the stakeholders involved – from governments, to regulators, to central banks – to define the legal and regulatory framework around fintech.

In other words, the government and regulators define the environment that new fintech ideas will grow in. And, as the fintech space continues to expand and become integral to how capital markets function, politicians and regulators will continue to be vital in shaping this growth.

The Startups

But, of course, fintech starts with the startups: the entrepreneurs and companies that dream up these ideas and seek out the capital and support to make them reality. And, right now, we’re seeing a wealth of innovation from the fintech scene, targeting a wide range of use cases across capital markets: From retail applications, like money transfers and FX transactions; to institutional applications, like securities trading and post trading; to market operators, such as exchanges, all of whom are increasingly looking at how fintech impacts their business.

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