Learning Objectives:

  • Define FinTech and its key segments.

  • Understand the disruptive impact of FinTech on banking.

  • Explain how banks are responding to FinTech competition.

7.1 Defining FinTech

Financial Technology (FinTech) refers to technology-driven innovation in financial services. The University of Edinburgh course covers “technological developments” as a key topic . Key segments include:

  • Payments: Digital wallets, real-time payments.

  • Lending: Peer-to-peer lending, digital credit scoring.

  • WealthTech: Robo-advisors, automated portfolio management.

  • RegTech: Regulatory compliance technology.

  • InsurTech: Digital insurance solutions.

7.2 The Disruptive Impact of FinTech

FinTechs are disrupting traditional banking by:

  • Superior User Experience: Digital-native companies offering streamlined, intuitive services.

  • Lower Costs: Reduced overhead through technology.

  • Innovation: Rapid development and deployment of new features.

  • Niche Focus: Specialising in specific segments or products.

7.3 Bank Responses to FinTech

Banks are responding to FinTech disruption through:

  • Partnerships: Collaborating with FinTech firms.

  • Acquisition: Buying FinTech companies to gain capabilities.

  • In-House Innovation: Developing digital capabilities internally.

  • Investment: Investing in FinTech ventures.

 

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