​Jeff Kagan: FinTech and Mobile Pay Change Banking

Jeff Kagan  |

FinTech or Financial Technology and Mobile Pay are changing traditional banking. Every industry goes through periods of rapid and dramatic change from time to time. We’ve seen this happen in industry after industry over the last few decades from music to movies to books to computers to smartphones and more. Now, banking is starting to go through this same transformation.

What will this transformation look like, and who will the winners and losers be? Fintech and Mobile Pay are rapidly rewriting the rules of banking. There are many reasons the new rules are suddenly being adopted so quickly and easily, threatening the traditional banking industry.

Winners in Fintech and Mobile Pay

Banking is about to go through a major transformation. The only question is: Going forward, who will the winners be? Smartphones are now in the hands of consumers and business customers, and they will usher in this time of change.

It makes many aspects of banking, like loans, easy for companies in this space. Banking has been a slowly innovating, and in many cases, stodgy old industry. The industry still often forces customers to visit banks, sit at desks, meet with loan officers, fill out forms, jump through various hoops and wait weeks for an answer.

The same process is now quick and easy thanks to modern technology that each of us carry with us everywhere we go, smartphones. These could help to quickly transform the entire industry.

Fintech and Mobile Pay Changing Banking

Are the banks ready for this rapid transformation? Today, everything is going online and becoming very quick and easy. Today, with smartphones in the hands of everyone, the ways we can interact with banks is changing. Today, many new ideas are entering the marketplace.

Change is coming to the banking industry, which was built over generations with branches and layers and time as part of one larger, sticky process.

Banks are Studying Mobile Pay and Fintech

What is the banks response? They say they are studying this issue. However, this issue is changing the industry so rapidly, banks may get left behind if they don’t get to it and play a leadership role.

Looking at other industries, this has already happened many times before, hasn’t it? Think about how technology quickly changes everything. How Apple (AAPL) iPhone and Google (GOOG) Android sent Blackberry (BBRY) and Nokia (NOK) from the front to the back of the line virtually, overnight. Think about the Internet and IPTV as they rapidly change traditional cable television space.

Moment of Change

This moment of change is a time when the existing players either rise to the occasion or fall behind. And this moment of change is now focused on the banking industry.

Smartphones were around for years before the iPhone and Android changed the world, practically over night. The same thing is happening with banking. This transformation started a decade or two ago online with companies like PayPal (PYPL), but in recent years, it has really started to explode with growth and new ideas thanks to the new world of technology and the smartphone.

PayPal Started This Twenty Years Ago

Think about all the new competitors jumping into this space. Companies like PayPal, Apple Pay, Android Pay and Samsung Pay. Also, think about retail stores like Target (TGT), Walmart (WMT) and others. A whole host of large and small companies, every one of which want to change the banking world and lead the new space. Change is coming like a bulldozer. Are you ready?

There are also a growing number of newer and smaller companies getting into the banking industry. These are the very early days of this new segment. That means there will be plenty of disruption in the years to come as they change the rules and try to lead going forward.

Large and Small Competitors in Mobile Pay and Fintech

Some of these companies will grow, crest, then fail. Others will grow, change the banking world, and stick around as leaders. As an investor, choosing which is which in advance is difficult, but in general, the industry is changing...and rapidly.

Next, consolidation will be the next wave, as the many smaller providers merge and get larger. This happens in every sector. It always starts out with smaller and newer competitors, then over year’s consolidation begins as the industry segment matures.

Fintech, Mobile Banking Popping Up on the Radar

Suddenly, many Fintech and Mobile Banking companies are contacting me to get on my radar. These are the companies that understand the importance of name recognition and marketing. At this early time in this space, everybody wants to be known as a winner and transformer.

Positioning is key to success. I sense this segment is getting ready to explode with rapid growth and transformation during the next couple years.

Of course, this will not impact every aspect of banking. There will still be plenty of room for traditional banks for certain needs. After all customers need to deposit their funds and keep them in safe places like a bank. However, the industry is poised for transformation. That means traditional banking community is facing this emerging threat.

Traditional Banking Facing Threat

Either way this massive change wave is starting to sweep across the banking industry and will transform every aspect of the sector in many different ways over the next several years.

That means every traditional bank must be taking this threat seriously. Either that or they face losses of business and market share. Even leaders of today are at risk. In fact, the larger banking success stories may be the hardest to adopt quickly because of their size.

The good news for consumers and business customers is there are many more options for loans and other banking services other than traditional banks. And these options are only growing. The bad news for traditional banks is that these smaller competitors are entering the marketplace and starting to carve away at this lucrative segment.

How Quickly Will Banking Change?

This segment is going to be one of the fastest growing and rapidly changing that we have ever seen. Think long distance in the 1980’s and 1990’s. Think wireless in the 2000’s. Think books, music and movies. These industries have all changed quickly. That’s the kind of change and reinvention we will see in the next few years in banking.

This is exciting. The Fintech and Mobile Pay industries have been preparing for this moment.

The next question is: Who will the leaders be? Will they be traditional banks? Will they be companies like PayPal? Will they be the newcomers like Apple Pay and Android Pay? Will they be retailers like Amazon (AMZN), Walmart or Target? Or will they be newcomers with big ideas?

These are the questions. So stay tuned. Things are just getting started.

Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at jeff@jeffKAGAN.com. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
WMT Walmart Inc. 97.15 0.98 1.02 8,950,724 Trade
AAPL Apple Inc. 219.31 3.29 1.52 33,078,726 Trade
AMZN Amazon.com Inc. 1,764.03 -6.69 -0.38 5,907,246 Trade
PYPL PayPal Holdings Inc. 84.78 7.30 9.42 34,211,905 Trade
NOK Nokia Corporation Sponsored American Depositary Shares 5.62 0.07 1.26 17,885,353 Trade
GOOG Alphabet Inc. 1,096.46 8.49 0.78 1,267,649 Trade
BBRY BB BlackBerry Limited
TGTX TG Therapeutics Inc. 5.37 -0.21 -3.76 1,198,506 Trade


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