The fintech sector is in its fourth wave of innovation, led by new technological developments and implementations and embedded finance, a new report has claimed.
AWS, Innovate Finance and Finch Capital collaborated to produce the AWS FinTech Report, which said the latest wave of fintech innovation is fintech enablers from 2015, following digital challengers from 2010 to 2015, e-payments and financial marketplaces from 2000 to 2010 and fintech software from 1970 to 2000.
The report said a new wave of companies leveraging technologies like artificial intelligence, machine learning, blockchain and open banking APIs are empowering the evolution.
These are being offered to enable fintechs and financial institutions to offer a better customer experience, for example, via quicker digital onboarding of companies and KYC and by allowing non-banks to leverage their brand and customer base to provide relevant financial products and services.
The report cited a survey from the MIT Sloan Management Review which found that 84 per cent of organisations believe that Al will allow their organisation to obtain or sustain a competitive advantage and over 90 per cent of financial services companies plan to accelerate automation initiatives due to Covid-19.
It said that given the long history of pioneering data analytics in the sector, financial services firms are primed to take advantage of this technology and the benefits it offers.
The report said that embedded finance is transforming the distribution model for financial services and is fast becoming one of the most disruptive trends across payments, banking and lending so it will increasingly become difficult to recognise fintech as its own distinct sector.
“As the UK industry body for fintech and financial innovation, we are keen supporters of more collaboration among players in the sector,” said Janine Hirt (pictured), chief executive of Innovate Finance.
“Our fintech partnerships programme connects fintechs to banks, and fintechs to other fintechs, to help them find ways to develop new and exciting products and customer propositions. The explosion of fintech “enablers” in the last few years is as fascinating as the story of the growth of B2C-focused fintech companies.
“The start-ups developing and providing cutting-edge technologies from core infrastructure, to customer onboarding solutions, to payments systems are disrupting financial services as much as new digital banks.
“The key to the growth of these fintech enablers is partnership. As an industry, we need to create an environment that enables fintech’s partnerships to thrive.
“However, to support this, the industry needs to understand both the drivers and the barriers to successful partnerships, which are key to helping the UK’s global fintech community to grow and scale.
“Fintechs rely on partnerships to maintain focus on their end customers. Fintech partnerships matter because they are a vital enabler in creating better products and better services for consumers, financial institutions, and small- and medium-sized enterprises.”