Firstly, I must recognize my ignorance about this subject, which is increasingly present in the media, forums or social networks. I had to investigate a little to clarify myself, and to separate the wheat from the chaff. I have no doubt that there can be a bubble, but I also believe that in an incipient way there are changes in everything related to certain areas of banking management and economic and contractual transactions between companies.
It is called as Fintech those companies with a technological base applied and developed to provide services and solutions in the financial field. I know that this sounds very generic, but the truth is that the spectrum of initiatives included in this concept is very broad. Many start-ups are applying the full potential of today’s technology to compete in markets traditionally restricted to banks. We can find non-bank companies offering payment services between companies or individuals, loans, foreign exchange operations, optimization of treasury positions … and so on to a myriad of services, usually on digital platforms, offered in a more immediate, efficient and economical way.
These new companies are characterized by offering niche products, for their agility to adapt to possible changes in the market, and for having a reduced cost structure. In short, the opposite of how conventional banking works. In fact, it is not surprising that banks are scared and have started a race to develop and buy Fintech. (A short comment: there are rumors that some of the big technology companies could get even more into the banking business, which could be a revolution in the sector.)
There is one disadvantage that, undoubtedly, these new entities will have to overcome: trust. Despite their background and their many vices, we continue considering banks as safe and solvent entities and we look with suspicion on these initiatives. This is changing, but at the moment it can be a serious barrier to market entry.
I think that after a stabilization phase, mergers and acquisitions, a bunch of companies will remain and will dispute to the banks part of the cake. The financial managers at the companies will have (already have) new options, beyond the banks, to do certain transactions in a faster and more affordable way. It will not mean to stop working with the banks, but to stop doing it for some things that we had never thought to do otherwise. Maybe now another operator handles international transfers in a cheaper way, maybe we get better exchange rates with another intermediary, maybe the funding comes from another source … we have to keep our eyes open.