Why are there so many fintech startups when they all seem to do the exact same thing?


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.