Fintech Ecosystem: Innovation, Disruption and Collaboration


(Article by Vijaya Thyil)

Technological innovations focusing on the financial industry has led to a rapidly growing new ecosystem called Fintech.  A biological ecosystem generally comprises of organisms portraying continuously evolving relationships in a specific climate, leading to complex, non-linear structures. This is exactly what we are seeing with the Fintech entities. The economic climate is just right! The breakdown of trust due to the recent financial crisis has meant that society perceives a brick-and- mortar financial institution no different to a cloud entity!

Vijaya Thyil

Vijaya Thyil

Simultaneously, the extensive use of smartphones and web 3.0, the uncontrollable rise of consumer debt levels and the massive increase of international financial flows have made the conditions ripe for Fintechs to thrive. However, due to the recentness of this ecosystem, the timescale of the entities is in its embryonic stage. That is, how quickly is a Fintech born; when and how does it die; how does it exit, say, through an IPO or acquisition; nested versus non-nested structures; the social impact of Fintechs and so on are continuing to be recognized as they occur.

We keep hearing the term ‘disruption’. Why?

At first glance, the emerging scenario appears quite simple: Fintech companies, mainly young, entrepreneurial start-ups, producing innovative digital technologies to improve the customer experience, efficiency and range of the financial services such as lending, payments, retail and institutional investments, equity financing, and remittances. Entrepreneurship, financial development and digitisation are not new, right? Why then are we referring to a ‘disruption’? Well, the rapid speed at which the innovations are being created, commercialized and embraced by the society, globally, means that traditional business models of financial services are collapsing or being swiftly dismantled and recreated. One would expect the time period to be disruptive and ground breaking.

How would you describe the collaborators?

While the convergence of entrepreneurship, financial services and digitisation necessarily means the involvement and collaboration of multiple entities, the synergy created by the Fintech ecosystem is much larger due to the fundamental, intrinsic and pervasive influence of both financial services and digital technology in our day-to-day lives. So we are seeing start-ups, seasoned entrepreneurs, local and foreign investors, venture capitalists, financial institutions, insurers, wealth managers, governments, telecom providers, retailers, corporations, consumers, educational institutions, and, specialist consultants which then gets networked into hubs, accelerators, incubators and so on. The birth of new entities in the ecosystem occurs from both serendipity as well as planned innovations. The collaborations are customized, pro-active and dynamic.

For instance, banks are working with start-ups to ensure that the innovations produced match their needs, and investors and VCs are willing to direct huge capital towards these start-ups because of the high returns. Furthermore, financial institutions are also starting to provide greater funding for the Fintech companies to get access to new products in a shorter timeframe. Governments are very supportive of Fintech due to the increase in jobs, skilled workforce and inflow of capital, and are trying to provide attractive environments for Fintech companies to thrive in.

In particular, how is the academia –Fintech collaboration occurring?

The academia’s collaboration with the Fintech ecosystem is occurring through several streams. The Entrepreneurship, Finance and banking, IT and Communications disciplines are supplying the founders of Fintech startups. Universities and centres are providing mentoring programs and boot camps, sponsoring student-led Fintech clubs and allowing the use of their campus spaces for Fintech meets and events. Academic research is evolving around data analytics, cybercrime and fraud protection, network analysis and Fintech business models with new academic and practitioner journals being founded for disseminating the research. Technology companies in turn are partnering with Universities by setting up Chairs focused on expertise in finance, digital technologies and entrepreneurship to facilitate the rapid and smooth knowledge transfer and commercialization of academic research.

Dr Thyil is a member of the CFA Institute and CFA Society of Melbourne, and a Fellow of FINSIA. Her research expertise is in financial intermediation and business model innovation and she is one of the academics leading the research on Fintech.

Originally posted on Criterion Conferences’ Fintech Sydney Blog


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