The World Economic Forum (WEF) recently released its latest ‘State of the Nation’ report on fintech globally, in collaboration with Deloitte.
The paper builds on four years of work, and is an output of the Disruptive Innovation in Financial Services project that had its genesis at the World Economic Forum Meeting in Davos, back in 2014.
The overarching conclusion of the report was that while fintech businesses have materially changed the basis of competition in financial services, they have not yet materially changed the competitive landscape.
The report argues that the continued reluctance of customers to move away from incumbents has prevented any player from dominating a market vertical. Innovations are clearly not being seen by potential customers as ‘significantly better than’ banks and incumbent FIs in order to overcome severe switching inertia. Establishing new financial infrastructure has also been a barrier.
While the report cites 8 disruptive forces as having the ability to shift the financial landscape going forward, in my opinion they have missed one critical theme – the changing nature of how we live our lives.
Banks and traditional FIs have been building products for decades that have catered to a market with a fairly universal idea of what employment is and expected social behaviour.
Having one or two jobs in one’s lifetime, marrying once, buying a house and retiring at 65 have been the bread and butter on which financial services have built product offerings.
But with the rise of the gig-economy, delayed home purchases and the increasing number of women in the workforce delaying marriage, then maybe it is this seismic social shift or disruptive force that will empower fintech to take hold.
To give you some idea of what this looks like, here are some statistics and trends worth looking into.
- It’s estimated 5.8M Americans currently operate within the gig economy. That’s expected to double in the next four years.
- The 2009 US census found that single women outnumbered married women for the first time. That number can only have risen. Millennials in general are eschewing marriage or at least delaying it.
- Home ownership is also dropping and co-working companies like WeWork are coming up with innovative co-living concepts like WeLive.
In my opinion Fintech that sees and understands this changing landscape and can piggyback on socially disruptive change will be successful. Just last week I met a financial advisor who had done exactly that, by building an online tax return platform that specifically catered to the side-hustler community. He’s formed a partnership with Uber locally and said he was amazed at the ecosystem of services that have sprung up off the back of these tech giants.
It really should be no different for fintech.