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

Question

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

Answer 1

>I find this puzzling because surely fintech applications should work like a social network, i.e. it makes sense for everyone to be on the same application, in the same way Twitter works because lots of people are on Twitter.

Yes, and no. Lending does not have strong inherent network effects, and payment network effects are significantly lower (vs. social networks), because of regulations forcing interoperability, and the general need for inter-network payments (either via some platform providers, or just strong standards & protocols)

Given startup A’s users can pay money to Startup B, based on simple shareable identity markers like phone number, or a QR code, there’s no inherent reason why both cannot exist and compete for users.

China is interesting because large parts of the stack exist on Alipay and Wechatpay, but you should think of many of start-ups which are coming up, as equivalent to the startups/ financial players in china which build their offering on top of WeChatpay.