If you're interested enough in the Android OS to be here reading this article, it's quite likely you do just about everything on your phone. You likely have apps for fitness, productivity, shopping and banking. A fairly large swathe of the population at large makes use of mobile payment solutions in their many forms, such as Paypal, Android Pay, Apple Pay, Samsung Pay and Venmo. Interestingly enough, it would seem that these upstarts, known collectively as Financial Technology or fintech, stand to disrupt the multi-billion dollar banking industries that have been around for hundreds of years. Brian Moynihan, head honcho of Bank of America, goes as far as saying, "it may allow part of our industry to be forever taken away from us."
Fintech hasn't been around terribly long in the grand scheme of things, getting its start through various elements such as Softcard, known as Isis back in the day, and Google Wallet, the predecessor to Android Pay. Bigger companies got into the swing of things through mobile payment apps that have slowly evolved over the years. From those earliest days, though, the new segment of services was gaining ground. Traditional banking began a bit of a freefall, with those reporting weekly branch visits according to one survey falling by 12 percent of U.S. bank account holders from 2010 to 2014, while users of mobile transaction services jumped from 9 percent to 27 percent of the same demographic. Every financial segment from consumer banking to wealth management, credit and even stock trading, were beginning to feel the pressure building in the mobile space.
Speaking on the mobile front and the fintech revolution, wealth management firm SigFig's chief executive Mike Sha said, "People have such a daily relationship with their smartphones now, almost no matter what their age..." Without a doubt, he has a point here. Just about anybody who owns a smartphone interacts with it on a daily basis and almost always goes beyond simple calling, texting and idle web browsing in their interactions. Indeed, the number of people who access the web more often from their phone than from a computer is somewhat staggering. SigFig, despite a userbase who tends toward the older demographic, reported recently that 50 percent of their users use their smartphone to reach the service. Mobile payment app Venmo, a fork of Paypal built for paying for meals, rent and other expenses, saw their total payments rise this quarter to a fairly jaw-dropping $2.1 billion. Clearly, for traditional banks, the writing is on the wall. Some, like Chase and Wells Fargo, already have mobile apps with slowly growing feature sets, but many of them aren't quite on level to compete with the likes of Android Pay and Samsung Pay just yet.
While the fintech sector may lack the clout and legal backing of traditional banks, the appeal is obvious and in many ways, the writing is on the walls. Banks can't depend on their regulatory chops forever and that's becoming increasingly clear. Back in November, an advocacy group called Financial Innovation Now popped up to stress that point, formed by Apple, Google, Amazon, PayPal and Intuit. Investments in retail and consumer fintech elements more than tripled from 2014 to 2015, going from $2.2 billion to $6.8 billion. Most major banks are beginning to adapt, tying into services like Android Pay and Apple Pay as Wells Fargo has, or buying up smaller services in order to create their own solutions. CitiBank, in fact, has formed a separate unit for this purpose. Known as Citi FinTech, the new division was given orders by chief executive of global consumer banking Stephen Bird. Bird stressed that the bank had reached a "pivotal time" and had to adapt to the slew of modern competition, as well as modernization efforts from traditional opponents. While old-fashioned banking may never die completely, the threats to the cornerstone segment of the American market and many others are plain to see and must be acted upon soon. With things as they are, fintech stands to all but upend the traditional financial services industry.