According to the definition of Fintech Weekly, financial technology, nowadays better known under the term "FinTech’", describes a business that aims at providing financial services by making use of software and modern technology.

Advantages and added values

Architecture and software are at the centre of the race between incumbents and FinTechs. Partly due to their aging infrastructure many incumbents failed to create a platform that meets the demands of their customers. As FinTechs do not have the burden of a legacy infrastructure, they often achieve the goal to create an online experience with 100% customer satisfaction.

FinTechs[1]

• offer solutions that are efficient and effective at lower scale.
• offer innovative products that can be tailored to the needs of small businesses, including, inter alia, marketplace lending, e-commerce finance, invoice finance, online trade finance and online supply chain finance.
• can help to improve payment systems, invoicing, collections and customer relationship management as the solutions include supply chain finance solutions and e-invoice management portals.
• is allowing to conduct transactions through mobile phones and tablets. Doing so, it improves data efficiency and customer experience on the one hand, on the other it reduces compliance costs for businesses as data aggregators are able to synchronise financial data from various sources and integrate bank accounts from different financial institutions.

Today, FinTech companies directly compete with banks in most areas of the financial sector to sell financial services and solutions to customers. New technology deployment cycles will be much quicker in the future. Many incumbents feel that the current time taken for their organisation to deploy new technology had either a negative impact or was not providing any benefit at all. Partnering with a FinTech company might be a solution.

More and more traditional financial services companies are recruiting positions like "Head of Innovation" or "FinTech Specialist". Incumbent’s innovation department is often distributing a summary of existing and upcoming FinTech companies to their board of directors. In this way, incumbent’s boards get an idea of possible FinTech companies to partner with or to acquire, which shows that FinTech is ubiquitous within the traditional financial industry. However, it is too early to say that FinTechs will put banks out of business, also because there are still a few obstacles to overcome.

FinTech companies often need to cope with a lack of software developers who are able to develop the product even if the final business plan already exists. As a result, software development often represents the bottleneck for these start-ups to launch a ready product into the market. A solution might be the recruitment of software developers, which is, however, very lengthy and time consuming. Another option is a third-party vendor support.

Many FinTech companies enter the market with great business ideas and receive funding. However, the integration of their solution into the existing infrastructure of a bank remains a big challenge. Good examples in this context are Bloomberg terminals, which are often solely used for chat communication. Banks often complain about the cost of Bloomberg terminals, many IT departments of banks stated: "A Bloomberg terminal is a very expensive chat solution. However, traders want to keep them as they do not want to lose their Bloomberg contacts." FinTechs were trying to displace Bloomberg by offering another chat solution, but the integration of the chat software into the existing banking infrastructure is a major hurdle. Also, FinTech companies must constantly develop the software, having, as already mentioned, only a limited number of developers available.

Software developing houses like Specific-Group might be needed for incumbents and FinTech companies in getting in front of the race with innovative solutions.

Specific-Group is one of the well-established players in the software development field for the financial industry within Germany and Austria. It has deep expertise in the payments backend software development within financial markets and has already supported key players in the banking and insurance market with tailor-made software solutions.

---

^[1] fintech.treasury.gov.au/economic-benefits-of-fintech/