# Fintech’s dynamic potential
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-05-29
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: The Impact of Fintech Disruption in Financial Services
Meta Description: Learn how the rise of fintech companies is causing disruption in the financial services sector, forcing banks to innovate and adapt in the evolving market.
URL: https://financedigest.com/fintechs-dynamic-potentialhtml

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_By_ [**_Dan Read_**](https://www.tltsolicitors.com/people/dan-read/) **_,_** _partner_ _at law firm TLT_

The rise of fintech companies and their disruptive propositions has been an interesting development for the financial services sector, causing existing banks and other financial services companies to assess the extent of their impact on the market and the potential opportunities they present.

This has been particularly true since the introduction of Open Banking and the second Payment Services Directive (PSD2) on 13 January 2018, which opened the door for new platforms wishing to make inroads in the financial services industry. At our recent conference to discuss the early lessons under Open Banking, we heard how all kinds of businesses are already innovating and reacting to the changes, but the real disruption is yet to come.

We have already begun to see a significant amount of change in the [payments industry](https://www.financedigest.com/end-of-year-overview-of-the-payments-industry.html "End of year overview of the payments industry"). There are now a myriad of companies that are not obvious financial services players but have engaged in using technology to enable consumer and business payment services – whether through mobile technology, [online payment gateways](https://www.financedigest.com/online-payment-gateway-market-to-witness-a-cagr-of-10-3.html "Online Payment Gateway Market to witness a CAGR of 10.3%") or new ways to handle and manage the billions of transactions processed every day. As a result, [banks have needed to identify which services](https://www.financedigest.com/the-gmp-cell-banking-service-market.html "The GMP Cell Banking Service Market") they need to facilitate and support. They have also had to consider whether they themselves need to invest more in enabling [digital payments](https://www.financedigest.com/why-anti-spoofing-fingerprint-technology-is-essential-for-the-continued-growth-of-digital-payments.html "Why anti-spoofing fingerprint technology is essential for the continued growth of digital payments") through existing services like contactless, mobile, tokenisation and digital currencies.

[Fintech companies](https://www.financedigest.com/7-cyber-threats-fintech-companies-should-watch-out-for.html "7 Cyber Threats FinTech Companies Should Watch Out For") have also been making inroads in the retail trading industry. Because of this, [banks that have embraced fintech have been able to engage with consumers](https://www.financedigest.com/consumer-staples-banks-lift-uks-ftse-100-after-sharp-selloff.html "Consumer staples, banks lift UK’s FTSE 100 after sharp selloff") more effectively through a wider, more convenient offering that meets ever-increasing expectations. The use of and interaction with [fintech start-ups has enabled retail trading institutions to be more agile in how they test and adopt new technology](https://www.financedigest.com/financial-technology-fintech-how-to-navigate-the-latest-trends-and-innovations.html "Financial Technology (FinTech): How to Navigate the Latest Trends and Innovations"). Rather than developing their own software, apps and tools internally, as most institutions have done in the past, they can now go to an increasingly large [market to get the best tools for their needs and they also have the commercial leverage to control](https://www.financedigest.com/automatic-door-control-market-2022-outlook-current-and-future-industry-landscape-analysis-2026.html "Automatic Door Control Market 2022 Outlook, Current and Future Industry Landscape Analysis 2026") how that product or service is developed. The diversity of offerings and the customisability of [fintech platforms](https://www.financedigest.com/matchly-the-us-fintech-platform-that-enables-employees-to-access-their-401k-employer-match-raises-1-7m-in-pre-seed-round.html "Matchly, the US fintech platform that enables employees to access their 401(k) employer match, raises .7m in Pre-Seed Round") have ultimately helped retail banks become more competitive.

While disruption in these [markets has largely been driven](https://www.financedigest.com/demand-for-automotive-radiator-market-driven-by-shifting-consumer-perceptions-and-growing-awareness.html "Demand for Automotive Radiator Market Driven by Shifting Consumer Perceptions and Growing Awareness") by ambitious new fintech players, other institutions are now also grasping such opportunities with the creation of incubators, accelerators and institutionally funded innovation programmes and competitions. There is increasing appetite for institutions to invest directly in fintech companies emerging from the hatchery. Indeed, as we learn more about how the finance services [industry](https://www.financedigest.com/hybrid-working-a-risk-or-opportunity-for-the-financial-services-industry-2.html "Hybrid working: a risk or opportunity for the financial services industry?") is evolving and start to see the true potential for service and commercial innovation, every market player is reassessing and adapting their position.

Institutions are increasingly looking to participate in the fintech market, particularly the regtech [market which is set](https://www.financedigest.com/tissue-diagnostics-market-set-for-rapid-growth-by-2030.html "Tissue Diagnostics Market Set for Rapid Growth by 2030") to gain in prominence. Large institutions have many options at their disposal but are predominantly [seeking](https://www.financedigest.com/nexi-open-to-options-as-banco-bpm-seeks-partner.html "Nexi open to options as Banco BPM seeks partner") to use a blend of these options to cover all bases for their clients. They are funding innovation through incubators and start-up initiatives, looking at in-house [product development and creating their own innovation](https://www.financedigest.com/product-innovations-and-advancements-in-technology-to-boost-automotive-ignition-system-market-growth.html "Product Innovations and Advancements in Technology to Boost Automotive Ignition System Market Growth") hubs. They are also looking to either buy-in expertise by partnering with credible [fintech organisations or investing directly in fintech businesses](https://www.financedigest.com/how-to-overcome-the-current-challenges-facing-your-fintech-business.html "How to overcome the current challenges facing your fintech business").

Some moves will be defensive, while others will be more forward-looking. Either way, as time goes on and the role of technology in financial services grows, it is likely that fintech, regtech, banks and other financial institutions will become increasingly proactive and [innovative in their use of technology](https://www.financedigest.com/cloud-professional-services-market-to-be-driven-by-technological-innovation-tmr.html "Cloud Professional Services Market to be Driven by Technological Innovation | TMR"). In the future, machine learning and AI could [assist with process-driven tasks while blockchain could change](https://www.financedigest.com/lane-change-assist-systems-market-overview-business-growth-development-factors-application-and-future-prospects.html "Lane Change Assist Systems Market Overview – Business Growth, Development Factors, Application And Future Prospects") the manner in which syndicated loan portfolios are handled and transactions are carried out.

As fintech’s dynamic potential is realised, the [lines between what is tech and what is finance are set](https://www.financedigest.com/boe-set-to-walk-the-line-between-inflation-and-recession.html "BoE set to walk the line between inflation and recession") to become increasingly blurred.


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