When it comes to lasting and impactful developments on our everyday lives, the FinTech movement is certainly high on the list. In fact, we would venture to say that it comes in at a solid second, behind only the Industrial Revolution. For the past century or so, we have seen technology growing at lightning speed, much to the amazement and convenience of mankind (well, most of it, anyway).
In particular, the financial industry has incorporated and embraced technology to update a number of services, saying farewell to many long standing and established procedures of financial transactions.
Financial technology, or FinTech, began to take over the startup space, a trend that continues to this day. Further, traditional banks are finally beginning to take the disruption that these startups created seriously, and are looking for unique opportunities to collaborate with these companies. What does this mean for these up and coming companies? Simple - it means that, as a startup, you can now work with large and established corporations, especially in the finance sector, earlier than almost ever before.
While some have predicted that the heyday of FinTech has come and gone, we would argue that this couldn’t be further from the truth. Let’s take a closer look at 2 reasons why FinTech is booming:
1. There in a basic and fundamental contradiction between the worlds of technology and finance.
Traditionally, banks and the finance industry as a whole have been a slow moving sector. Further, it takes a significant amount of time for FinTech companies to break into the market, regardless of what types of services they offer. Meanwhile, investors are putting pressure on both of these parties to deliver fast results and quick returns.
Banks are slow to adapt to change -- and the bigger they are, the slower they tend to be to adopt change. And investors are looking at short term goals and horizons, regardless of the industry (FinTech included). But the reality is that FinTech isn’t going anywhere for a long time.
When the traditional players in an industry adopt a new way of thinking and doing, it shows real long term potential. Today’s large banks are investing in technology, such as online loan applications and the technology to upload documents digitally, which only proves that FinTech is continuing to become more mainstream.
2. The realities of the market encourage short term thinking.
Most companies are assessed and rewarded quarterly, and are constantly under pressure to keep profits up. The same principle holds true for financial technology companies, as well. The companies that are run well and that can keep their costs under control will continue to survive and thrive. The ones who can’t, well… won’t. Other new companies will continue to evolve and fill the voids in the marketplace, just as alternative lenders began doing when the big banks stopped handing out loans during and after the Recession.
Financial technology continues to touch virtually every industry, and commercial real estate is no exception. Nearly every piece of CRE property can trace its roots back to capital from a CRE lender. And just as new and enterprising FinTech companies have disrupted the consumer lending space, these same tech-savvy alternative lenders are reshaping the face of the CRE landscape. This means a more streamlined and efficient process for CRE sales and financing, thanks to effectively leveraged technology.