Why Now Is a Great Time to Specialize in Fintech

As technology continues to produce cutting-edge innovations across industries, fintech is quickly becoming a key player within the business and finance sectors.

Fintech can now be easily applied to a wide range of business and financial services, changing the way people borrow and lend money, invest, and deal with credits and payments.  

But how is this going to affect business in the long run, and what should business schools do about it?

The fintech phenomenon

The widespread adoption of AI across business fields has led to huge growth rates in the fintech sector.

Just in the UK, investment into fintech firms grew by 500 percent in the past three years, with London becoming one of the industry’s biggest hubs.

Europe and the US have seen a record-high growth in investments too: 133 percent for the former and 170 percent for the latter.

While fintech firms weren’t always perceived as direct competition to traditional financial institutions – such as banks and insurance companies – this has changed in the last few years.

In fact, in the second half of the 2010s an increasing number of fintech companies acquired banking licenses, which, with the help of AI technology, allowed them to offer customers the same services as banks, such as direct debit applications and overdrafts. This created an alternative to traditional banking, disrupting the financial and banking industries, giving consumers more options on how to handle their money.

Fintech and coronavirus

Experts believe that the coronavirus pandemic and the lockdown measures implemented by governments worldwide as a response will further contribute to the fintech phenomenon.

A recent report by market analysis experts Vacancy Soft and recruitment firm Roger Walters found that fintechs might be better suited than traditional banking institutions to adapt and shape the ‘new normal’ by utilizing their top-tier technological capabilities.

In fact, as the adoption rate of online banking reached an all-time high of 73 percent in 2019, banks have often been too slow to transform branch-based banking into digital services and smartphone-friendly apps – giving fintech start-ups the upper hand. Revolut and Monzo seized the opportunity to take a significant chunk of the market share and have since become some of the most successful emerging firms of the past few years.

Moreover, with traditional banks closing down their branches to comply to lockdown measures, the next few months could see an even higher growth in online banking and fintech services usage.

“As normal restrictions on lending are waived to enable companies to ride out this crisis, artificial intelligence will play a key part in enabling the financial services sector to provide simultaneous support to thousand of businesses,” said Tom Chambers, a senior manager of technology at Robert Walters.

“As a result, AI-driven fintech lenders will be the biggest winners.”

What does this mean for the future?

Traditional banking institutions haven’t welcomed this change in the financial landscape.

A new report by the Hong Kong Institute for Monetary and Financial Research (HKIMR) found that 73 percent of traditional banks believe fintechs are too difficult to regulate, as the fintech landscape is still developing in many areas of the world.

Moreover, 78 percent believed that fintechs don’t possess adequate IT resources to protect themselves and their customers from cybersecurity attacks.

While this might soon aggravate the tension between traditional banks and fintech institutions, it could also open doors for new type of roles within the financial industry, such as mediators and middlemen between banks and fintechs.

Business schools should take this into account.

As more and more students apply for STEM business degrees to become more attractive candidates in the job market, there’s never been a better time to offer fintech specializations.

These will not only give graduates an edge in tackling the future challenges in business, but also involve business schools in the fintech revolution.