Business and finance can seem daunting. Though graduate employers do not expect you to be experts, it is a good idea to learn about some of the major growth areas that are affecting the financial world to prepare for interviews and work experience.
One such growth area is financial technology, better known as ‘fintech’. In a nutshell, fintech is all about using new technologies to create new financial products. This comes in many forms, from high-tech trading programmes in investment banks, to mobile apps like Monzo, to cryptocurrencies, such as Bitcoin.
According to EY’s Fintech Adoption Index, one third of consumers use at least two Fintech services, with Statista predicting that mobile wallet payments could potentially exceed $1 Trillion in 2020. In short, fintech use is on the rise, and looks like it will continue to grow in the near future.
Owing to their usage of cutting-edge technology, fintech start-ups can challenge the market dominance of more traditional financial products. For example, Better Mortgage offers a mortgage service that is 100% online and does not charge commission, which reduces the dependency on traditional mortgage brokers.
Similarly, a sub-group of fintech companies dealing with insurance use the wealth of data provided by consumers’ transaction history to offer more competitively-priced insurance products. For example, one company identified that consumers that bought rubber cups for the casters on the bottom of their furniture were, on average, less likely to claim on their insurance than consumers that did not take the same level of care over such minor aspects of their lives, meaning that the insurance firm could adjust its prices accordingly.
It is not only start-ups that are dominating the fintech industry. Goldman Sachs launched its online-only Marcus savings account in 2016 and many of the big banks and law firms now have departments dealing with financial technology.
Even so, many of the traditional financial institutions appear to have been relatively slow in capitalising on consumer demand for fintech, with the prime example of this being Monzo, one of the so-called ‘challenger banks’ that benefitted from the relaxation of banking laws that has taken place over the course of the last decade. Monzo is now valued at around $2 billion, an impressive amount in an industry previously dominated by banks founded hundreds of years ago!
The opportunities presented through fintech, together with the value of the innovations in this area, make its importance clear for anyone thinking of entering finance directly, or indirectly through consultancies and law firms.
Any challenge to tradition brings with it a lot of conjecture about what the long-term impact will be, or whether the innovation will just be a passing fad. Will Monzo continue to grow at the expense of other banks? How much will algorithms replace traditional trading methods? Will new companies be squeezed-out of the industry by the well-established incumbents? There are no easy answers here, but some recognition of the possibilities of fintech will ensure that you demonstrate the commercial awareness that many graduate recruiters look for.
Try reading some of the below sources to get a more in-depth knowledge of the subject to really impress at interview: