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 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.