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How FinTech Is Changing Business (and Bank Accounts)

Ryne Landers
Ryne Landers

Bringing some Mountain View innovation to Wall Street's cloistered enclave

Meet FinTech, 2015’s darling of the startup world: a new breed of business built on the passion and ingenuity of Silicon Valley, with the financial savvy and banking focus of Wall Street.

FinTech, a combination of the words “financial technology,” is the biggest story in startup growth in 2015.

While the term has been around for several years, it seems that 2015 is really the year that this fledgling offshoot of the larger banking industry has finally come into its own.

But what is FinTech, and how does it impact you? Let’s dive into how technology, married with payments, is turning the conventional financial industry on its head.

What is FinTech?

From the outside, Financial Technology could be described as the techpreneur countercultural movement to upend traditional banking and lending’s heavy regulation and strong resistance to change in order to make sending and receiving money easier. In an industry full of obscure acronyms and starched collar ideals, it’s surprisingly hard to find any two sources that agree on what FinTech is.

While originally defined as the obscure backend processes of setting up servers and software applications for the frontend of traditional banking institutions, the definition has exploded along with the industry’s growth. Specific definitions tend to vary quite a bit from source to source, but many follow the same basic idea of using technology to disrupt the traditional financial services sector.

FinTech, as we understand it today, is a very young industry. Two of the oldest companies in the game are a mere ten years old, founded in 2005 and 2006. Many other startups began between 2008 and 2010, and Investopedia notes that since “the end of the first decade of the 21st century,” the term “FinTech” has expanded to what we understand it as today, placing the modern industry at a mere five years old.

Perhaps that youth and speed of change is what makes the industry so hard to define. Daniel McAuley, an MBA student at Wharton School and co-founder of the school’s FinTech Initiative, defines FinTech as “an economic industry composed of companies that use technology to make financial systems more efficient." 

While this definition works pretty well, Investopedia’s additions show the broad strokes with which this label has been applied to the financial sector: “…the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies like bitcoin." As you can see, the FinTech industry is a quickly evolving technological umbrella that covers many different and diverse ideas related to the financial services industry.

Who is FinTech?

Beyond defining the dictionary entry of a word, the who and what of an industry is often just as important in defining our intuitive understanding of an idea. Think about how much our intuitive understanding, that instant gut reaction association we make between words and their core concepts, has changed in just the past three decades for the term “computer.”

In the same way, while FinTech may have originally been relegated to describing the IT department or server room of large banking industries even a scant few years ago, today’s emerging startups and established players have completely taken ownership of the term and run with it. Let’s look at some of the top players in the industry:

Payment Processing

Square – The most recognized FinTech company in the public’s eye, Square kicked off mobile payments with their innovative smartphone card swiper technology.

Stripe – Apple’s official partner for mobile payments via Apple Pay, Stripe is a leader in mobile-optimized and app-based checkout systems. Stripe's technology meshes with Apple's biometric security and digital wallet tech in iOS to allow millions of consumers to check out in a variety of apps and mobile sites merely by swiping their thumb on their phone. 

Payfirma – In 2011, Payfirma became the first company to bring mobile smartphone card reader technology to Canada and has since expanded into an omnichannel merchant account services processor.

Alternative Lending

These lending services provide novel new approaches to personal loans, providing more people with lending options and faster, easier application experiences than possible through traditional financial institutions.

Prosper – Launched in 2005, Prosper is the first FinTech company of this generation as well as the first peer-to-peer lending marketplace. It’s weathered many changes and industry regulations to grow to the company it is today.

Lending Club – Started in 2006 just after Prosper, Lending Club also began as a peer-to-peer lending marketplace and went through many of the same trials and industry regulation changes that Prosper did. It is now the largest marketplace of its kind.

UpStart – a unique personal loan service founded by ex-Googlers which takes into account your education and occupational history in addition to your credit scores to provide a more accurate lending rate and extend opportunities to more people than traditional lending services.

Wealth Management/ Automated Investing Services

Automated investing services, or “robo advisors” as they’re sometimes called, make use of machine learning algorithms and enormous amounts of data to make investing easy and inexpensive by cutting out the costly human advisor element. Additional information about automated investors can be found at Forbes and NerdWallet.

Betterment – one of the first automated investment services, Betterment’s website provides an easy-to-follow, transparent process to help novice investors begin their wealth building journey. Betterment features low fees and no account minimum.

Wealthfront – Unlike Betterment, Wealthfront has a $500 minimum, but charges no fees for the first $10,000 managed, making it a very attractive proposition to first-time investors.


Looking to invest in the lucrative Wild West landscape that is the collection of various cryptocurrencies? These are the places to start. There are many competing cryptocurrency exchanges out there, but these two are among the largest and offer additional features that put them ahead of the crowd.

Kraken – A feature-rich trading marketplace that combines the normal exchange features with forex-like trading and management. Kraken is also known for having some of the tightest security in the industry, and is one of the few exchanges to run a “dark pool.” Kraken was the first Bitcoin exchange to have trading price and volume displayed on the Bloomberg Terminal and the first to pass a cryptographically verifiable proof-of-reserves audit.

Coinbase – Called the “PayPal of Bitcoin,” Coinbase is both a cryptocurrency exchange and comprehensive digital wallet. Coinbase bills itself as the world’s most popular way to buy and sell bitcoin, and has exchanged over $3,000,000.00 in cryptocurrency so far.

How FinTech Is Changing Business

The constantly evolving face of the financial technology startups covers a wide variety of technologies, audiences, and services. How, then, do we sum up its contributions to business in one short article?

If we had to sum up the core commonality across the spectrum, I think the common threads would be increased accessibility and speed. Daniel McAuley used the word “efficiency” but even he second guessed its applicability to such a divergent set of companies and approaches. However, I believe that “accessibility” and “speed” are the correct choice of words here. FinTech provides different benefits for its various customers, whether consumer or business. Accessibility and speed play a part in every one of them.

For businesses, the accessibility gained is immediately obvious. Utilizing much faster, always on Internet connections, big data computing, and mobile connectivity, businesses are now able to buy in to complex, feature rich financial software suites and managed services that a decade ago would have cost millions of dollars in setup fees for equipment, program licenses, and trained technicians, not to mention the IT team to manage the whole solution. Smarter displays of information with real-time updates and the insights of big-data have provided business leaders with unparalleled business insights, allowing savvy businesses to update their marketing on the fly to take advantage of favorable conditions.

Those same factors also allow businesses to provide a similar level of enhanced accessibility to their customers. Greatly improved software designs and user experiences, fast internet bandwidth, and the universal adoption of smartphones has provided real-time access to financial information and transactions at a level never before possible. This has led to the rise of omnichannel payments processing, mobile banking, peer-to-peer payments, and even new ways of evaluating credit applications.

The Future of FinTech

What does the future hold in store for FinTech? It’s the question on a lot of investors’ minds right now. Payfirma’s President and Chief Product Officer, Kalle Radage, believes the future of FinTech is in reducing friction to pay. “Frictionless payments and banking mean faster growth for businesses and better experiences for consumers,” he said.

Reducing friction in transactions has been both the inspiration behind several startups and a very nice byproduct of the innovation from the majority of the businesses and technologies on our list. WePay’s Bill Clerico initially started his business as a solution to reducing the friction of transferring money among friends, and the immensely popular social payments app Venmo only provides further evidence that people are looking to transfer money more easily.

It could also be argued that greater transparency is both a driving force and byproduct of FinTech’s future. Perhaps the most intriguing FinTech technology with the potential for the biggest impact across industries and nations, the blockchain technology behind cryptocurrencies like Bitcoin is set to shake up “business as usual” in a way that no other financial technology has before.

While a discussion on the technology of blockchains is outside the scope of this article, the excitement and potential for deep disruption is reaching a fever pitch. Wired’s recent article on its adoption and development by financial and technological giants like IBM, JP Morgan Chase, Wells Fargo, and the Linux Foundation underpin just how far reaching this technology will be.

Blockchain technology provides a decentralized, more transparent, more secure method of tracking the exchange of money and other assets – including supply chain items, vehicle titles, and even diamonds. Is it any wonder this new area of FinTech has so many people excited?

FinTech has a bright future. With many new technologies and startup companies expected to reach maturity by 2020, it’s certainly going to be an interesting industry to watch over the next several years.

Image Credit: REDPIXEL PL/Shutterstock
Ryne Landers
Ryne Landers Member
Ryne Landers is the Director of Optimization and Analytics at Reap Marketing, a boutique digital agency in the historic Deep Ellum neighborhood of Dallas, Texas. Reap focuses on conversion rate optimization, paid search management, and development of custom campaigns. Reap utilizes uncanny insights to generate stunning returns for SMB and large business clients across a variety of industries: from a 171% increase in delivery orders for a national restaurant chain, to a $180,000 annual savings for a regional graphics print shop.