Start-ups and capital markets (1/2): Drivers of retail fintechs

Companies incorporating modern technologies into the world of finance, the so-called fintechs, attract consumers through better user experiences and attractive interfaces that work well. They use cutting edge technology and data in new ways. Globally, there are 8,000 fintech start ups. However, only a small number of them, less then 10%, focus on retail trading.

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The founders are usually interested in disrupting lending, retail banking and a variety of processes in banking. Also, the funds received by retail trading fintechs are disproportionately small, only about 4% of venture capital. However, this may change.

In the future, investors will probably use robo-advisors to manage their money just as today they use multiple bank accounts. Different fintechs will be able to offer different value propositions. According to the report Fintech and The Disruption of Retail Trading: Trends and Case Studies by the business school INSEAD, there are multiple drivers enabling steep growth in the field of retail trading.

1) Big data and visualisation tools

Consumers will be able to monitor deals on online platforms, trading with lower costs. AI and machine learning will help to observe trends. Real time dashboards will serve retail investors to deploy their trading strategies and better analyze trading opportunities.

2) Changes in pension schemes

In many countries around the world there are changes in pension schemes, so nowadays there is more capital to be invested by retail investors.

3) Regulation is evolving

European PSD2 allows for the use of third-party providers for money management. Banks are losing their monopoly on account and payment information regarding their clients, or at least, this monopoly will be weaker. That way, fintech companies can offer financial services using the infrastructure of banks.

-jk-

Article source INSEAD Knowledge - INSEAD Business School knowledge portal
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Start-ups and capital markets (1/2): Drivers of retail fintechs

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Start-ups and capital markets (2/2): Disrupting retail trading