FinTech in NYC (The Future of Financial Technology)
New York City's Silicon Alley has long been a hotbed of startup talent, drawing investors and companies from across the country. One of the most successful industries to have emerged is Financial Technology, or FinTech, wherein everyday financial processes are streamlined and improved through innovative technologies. In the past eight years, $50 billion has been invested in 2,500 FinTech companies, each carving a specialized niche as a platform service provider.
Is the future of finance born in the cloud?
FinTech on the Global Stage
In 2015, global FinTech investment grew 75% to $22.3 billion. As stated by Accenture's report, this was largely driven by interest across Europe and Asia-Pacific, with more deals spanning international borders. As a point of contrast, venture investment only grew 29% the same year. New York retained the largest proportion of domestic investment, growing from 27% in 2010 to 83% in 2015. Increased collaborative investment has also garnered interest in subsections of Financial Tech including Insurance Tech (InsurTech), Regulatory Tech (RegTech), and RiskTech. InsurTech start-ups alone saw a three-fold investment increase from 2014 to 2015, reaching $2.4 billion.
So what does this mean for traditional financial institutions? At present, banks are contending with increased pressure to reduce costs, expand client-facing technologies, and comply with stricter domestic and international regulations. When FinTechs first began to garner interest, many banks were concerned that they would be outright competitors. And while many FinTech companies operate independently of banks, the FinTech market has split in two: the collaborative and the competitive.
In response to short-term market pressure, more banks are looking to form strategic partnerships with these startups. FinTech companies in NYC have developed technology that specializes in delivering services to customers, and banks look to these companies as outsourced specialists, often a platform service provider or vertically integrated model. Since last year collaboration has increased by 138%, representing 44% of all FinTech investment. These companies enhance the standing of existing market players, while simultaneously ensuring their own longevity.
So how exactly are FinTechs closing the gap for their partner businesses? These companies can offer digitally-enabled customer service platforms, provide an integrated customer experience through single sign-on, assist with end-to-end processing, and help ensure compliance standards are being met. As banks continue to implement these third-party resources, many are scrapping plans to construct their own platforms, instead of investing their money in collaborative ecosystems of in-house and outsourced technologies. Current projections anticipate that the most successful financial companies will be "highly regulated entities that integrate complex supply chains of platform providers".
A Safer Industry
Perhaps the most exciting prospect of this FinTech boom is the manner in which it will help shape finance security. Corporate bankers have pumped money into RegTech, InsurTech, and blockchain to counter increasing cybercriminal activity. These technologies will assist in reigning in long-term spend on compliance, and potential costs incurred in a data breach. Now more FinTechs are specializing in anti-money laundering and machine-learning to mitigate risk and interpret changes to federal compliance requirements.
For both traditional financial services providers and emerging FinTechs, this is the era of collaborative business transformation. But a partnership is only as strong as the companies at play. Consider how a Managed Services Provider can set the trajectory for future success, and give you the enterprise resources to empower your business partners. For more information, contact an iCorps expert today.
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