What's the hype with Fintech?
Some people seem to consider fintech as a whole new field of finance, on the same level as IB/PE/VC/CB. Yet last time I checked fintech is just a buzzword to say that you Uberize something more or less related to finance? Then why does everyone pour money into all these "fintech" startups like it's some new hot shit that's gonna make them rich? Aren't all financial firms fintech firms as long as long as they don't use paper ledgers? Is the fintech bubble going to explode? Is the digital banking sector going to experience a consolidation? How do I short the libtards from SF who claim that their shitty payment app is powered by the black magic of FINTECH© and manage to get billions of investor money?
I worked at a Fintech startup for about a year so hopefully, my experience adds some value. First of all, I think the hype has some logical roots. The reason that financial services are attractive is that if you manage to succeed then you will eternally be charging society a % on all of their transactions. Think about the fees charged to businesses for every credit card transaction. If you own that, you quite literally own a % of the world for the rest of eternity. It just has to work once. Mix that with the modern tech start-up paradigm of building an MVP, launching, and then pursuing growth with no regard for everything else. This is the perfect VC play because remember, it just has to work once. Give 100 growth-psychopath founders a million dollars each and just send them to the moon. If one succeeds, you have an eternal investment. I actually remember doing calculations to estimate revenue given that we would grow our users by x% with each doing y transactions a month.
Yes and no. The term Fintech is too broad as your comment implies but this is by design. You don't talk about 'fintech' with your friends. You talk about 'fintech' if you are a founder talking to a VC. It's the implicit way of saying "I am growth-psychopath too and I already have two programmers and a working app ready to go. I'll go out and charge 2% of society and give it to you if you just give me the money now". If I had to define Fintech companies I'd define them as
A tech company whose business model is to facilitate financial transactions with the end goal of taking a cut
What those transactions are or how the cut will be taken is meaningless. The technology used to achieve it is meaningless too because nowadays there is no business without technology. Of course, even this definition is rough at the edges (due to some investors being brighter than others) because every founder now has an incentive to call themselves fintech if that is what the multi-millionaire in the conference room wants to hear. But fintech can generate real value. Getting a % of all transactions via a tech start-up is the same as taxing a nation except you don't need to start a civil war and raise an army to take down the current leaders.
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