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Did someone cancel the revolution?


Has the Fintech phenomenon already burned out? After a revolutionary birth, has it become a victim of the cost containment and lackluster productivity seen throughout the UK banking industry? And are uncertain political and economic conditions muddying the waters further? Shifts in the balance of global power appear to be underway—Eastern markets are gaining traction, while the besieged banking system in the West appears mired in challenges, both legacy and new.

Given Fintech’s seeming failure to live up to its transformative promise, this is an ideal moment to pause and reflect on how far the phenomenon has come, and to consider the next steps in the revolution. What challenges does Fintech face, and what should be considered in the battles ahead?

"Revolutions are not always abrupt, and sometimes their origins remain obscure."

Governor of the Bank of England


A new market is taking shape. The structure of the financial services market is changing, irrespective of the Fintech phenomenon, driven by economics, customer needs and regulatory responses to market failure. While the precise end state of the new structure is still to be defined, it will likely mean the end of vertical integration and a proliferation of new businesses providing customer access to financial services.

New players will coalesce around the different specializations needed for capital efficiency. Some may be able to justify integrating different specializations, but there will likely be substantially less cross-subsidization between specialist business models than at present. This will enable more transparent and fairer pricing, and will enable the surplus efficiency created by Fintech to flow more meaningfully towards customers than it can in the current market structure. Early signs are apparent in the collapse of fees payable for asset and wealth management services, for example.


To capture the greatest value from the Fintech revolution, markets should redefine the roles of market participants, focus on attracting more late-stage investment to enable Fintechs to cross over from R&D to real solutions, and create export tunnels and bridges that allow Fintech investment to grow. This will offer a far greater return than simply making a domestic market a better version of its current self. Markets should also consider:

  • Redefining markets: Is it time for Big Bang 2? The UK regulator’s leading role in fostering innovation has been justly praised, but it must now go further in establishing an environment where credible players can emerge to run horizontal platforms and services across the industry.

  • Growing investments to help Fintechs move up to the next level: Keeping a supply of dry powder to reinvest in new technologies should be a top priority for banks, both to create effective partnerships by investing from internal expenditure, and to benefit from new revenue streams unlocked by Fintechs through their own venture capital (VC) funds.

  • Encouraging first-mover innovation and strengthening export bridges: The UK’s Fintech bridges with China, Singapore and Australia are a step in the right direction. But there are clearly other large markets, with significant amounts of unmet financial service needs, to be tapped. Launching Fintech-enabled customer relationship businesses in high-growth markets like Mexico, Russia and China could be a valuable strategy.