I work in PR and have represented quite a few startup fintech companies. What puzzles me is that there are masses of these companies all around the world, yet they all seem to do the exact same thing (p2p payments, digital wallet stuff, transfer money to a business via an app etc.) They also market themselves in exactly the same way. Yet every day I see yet another utterly generic fintech company raise tens of millions of dollars in a funding round to do what every other app does.
I find this puzzling because surely fintech applications should work like a social network, ie it makes sense for everyone to be on the same application, in the same way Twitter works because lots of people are on Twitter.
I used to live in China and everyone there uses either WeChat Pay or AliPay and that’s it, and it works beautifully because everyone in the entire country is plugged into the same system (in China I could literally text money to my friends to pay them back for getting drinks, as well as pay my electric bills in the same manner). I actually had this conversation with a startup founder (although he works in agritech) and he basically said this to me, so I think I’m onto something.
Any insights you have are appreciated.
In: 1421
I work in financial services compliance, so I have some exposure to this as well. It’s always funny to me how they all market themselves as trying to “democratize finance.” Those are usually the lender fintechs who will lend to people with bad credit but are going to charge you 36%. More than anything, they remind me of the show Silicon Valley, which always made fun of the tech startups talking about how they were going to “change the world” through their particular brand of technobabble.
To really answer your question, I think they would all agree that it makes sense for there to be only one payment app or digital wallet or whatever, but they would each disagree about who should be the one. Since no one has conquered the space, everyone wants to get in because they have the irrational confidence to believe they can be the one.
In oversimplified terms: there is a lot of money around, investors want huge exits, investors dont want to take too many risks in this economy, there is a limited number of opportunities that seems safe and huge enough. So… everybody is doing the same thing.
It is like the car industry now, everybody is making boring appliances because that is what sells the most, but there are smaller but perfectly good markets right now that are way less competitive and up for grab.
I could also say the same about Hollywood… enough with superheroes.
Basically every new financial space needs new fintech. Different countries, cultures, ages, businesses, and governments all need different fintech. The possible combinations are endless, and as things change it gets even more complicated.
I know we all want a super simple system that’s cheap, easy to use, and works everywhere, but as a capitalist once said “where’s the money in that?”
To add to what the other people said: Easy funding. Since fintech has the potential to scale huge, some investors love to throw money at it
Sure, it could be a better user experience if every fintech consolidated into a single company.
However, every company wants to be that “one company” winner. Hence, many companies spring up doing similar things – and until one company dominates every facet of the market, there will always be room for new competitors to take a piece of the pie. And sure, a fragmented market means more apps and a less coherent user experience, but it also drives prices down – which is good for users.
This is basically just capitalism, it’s not necessarily unique to fintechs.
It’s basically same as crypto,a few have a good idea,many jump on the wagon and it basically comes down to who’s shit sticks to the wall the longest….they then become the first movers and will generally keep dominance in the market.
Investing in startups is basically like a lottery. Most of them fail, but very occasionally one goes to the stratosphere and everyone who invested substantially in it becomes a billionnaire. It’s not really possible to tell in advance which is which, but some people think they can. Those people like to throw a lot of money at startups (some of them are just ordinary people with a few thousand to spare, but some are very wealthy or are in charge of investing a bank’s money or something). Fintech is trendy at the moment, so if you set up a reasonably compelling fintech startup, you will probably be able to attract significant investment.
> yet they all seem to do the exact same thing (p2p payments, digital wallet stuff, transfer money to a business via an app etc.)
One factor you shouldn’t overlook is that many startups are attempting to get involved in questionable activities, or take advantage of legal loopholes. For example, the main reason we now have all these “buy now pay later” companies, which are functionally equivalent to credit card companies, is that by not being credit card companies they can evade all the regulations that were introduced to address past abuses by credit card companies. Or, on a more ambitious level, you have stuff like Wirecard, which started out as an atttempt to evade restrictions on payments for gambling and porn that exist in many countries, and then turned into a gigantic Enron-style accounting scam. Obviously companies like this are not very upfront about their goals and tend to spin stories about their amazing technologies and services.
All you gotta do to get rich is make a phone app, get everybody to download it, and sell their data. You don’t even need to make money off the app itself, you just need people to use it.
This is also why EVERY company in the history of companies want you to download their app. Your data is free money to them. Just sitting there on your phone waiting for them to take. Everybody wants in. So much so, you’ll find deals that are just too good to be true … You just gotta have the app.
Edit: To be more specific to answering your question: fintech apps are the kind of apps that you use passively, so they’re always running and you’re constantly using them. Even when you’re not playing on your phone, you’re using their app. These fintech apps need to run in the background to give you important notifications about your important moneys. It’s just a passive app format versus an active app where you have to actually open it and be actively using it.
Coz they don’t actually offer anything. They’re all just trying to scam investors with buzzwords like p2p and digital wallet
Speaking as someone who works in cyber security software, you see a lot of start ups who do the same thing pop up to fill a new niche, essentially with the hope they’ll get aqcuired by a major player for their technology. Im watching it happen right now. I assume the same applies to Fintech and most other software industries.
It’s much easier and cheaper to get a software startup off the ground. Very little overhead with the remote work world. All you need is a handful of engineers, a project manager or two, computers, and cloud infrastructure, and there you go.
Not like starting other traditional businesses that need physical machines or merchandise with a high startup cost.
Also, a lot of them are just living off of investors who have the hope they either make it big or get acquired – They’ll go under in two years and/or the IP will be sold off if it was half decent.
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