No doubt about it, fintech is officially cool. A recent report by KPMG1 estimates investment in Australian fintech sector has risen to US$675 million and lists 579 Australian Fintech start-ups. But what does Fintech mean?
A recent study2 found “what is fintech” ranked 8th on Google’s list of most searched queries related to fintech and concluded “There is currently no consensus about what the term Fintech means”
I’ll leave it to academics to cogitate the big questions. I’m much more interested in (and excited about) the benefits it will deliver for advisers and their clients.
A solution to a problem
Research shows only 20% of Australians seek advice from a financial planneriii and yet 80% of Australian retirees rely, at least partially, on the Age Pension4
Such alarming statistics should be a call to arms. Unfortunately, the high cost of delivering advice has resulted in most advisers gravitating to the more profitable clients, leaving most Australians underserved.
In his book “The Innovator’s Dilemma”, Clayton Christensen outlined the environment that inevitably leads to business disruption. Even if you’re not familiar with the concept of disruption, the explosion of fintech likely does not surprise. Our industry has been ripe for disruption for many years. What is likely to surprise many, however, is the impact it will have on traditional business models.
Data driven disruption
“War is ninety percent information.” ― Napoleon Bonaparte
Current commentary usually highlights robo-advice as the disruptor. But robo-advice is really just a visible, and rather simple, application of a significantly more powerful disruption.
Putting aside the human element for a moment, financial advice, at its core, is an exercise in data handling. Advisers capture, store, analyse and act upon data. Historically this has been a very manual exercise. Emerging technology will largely automate data management and provide advisers the tools required to deliver a more compelling experience, to more clients at reduced costs.
Initially the capability of these tools may limit their usefulness to simpler advice. But over time, more complex scenarios will be supported allowing the disruption to move up the value chain.