FinTech was once the hottest new industry in the world but now, on its face, appears to be cooling down. Looking at the stock from large online lending companies like Lending Club or OnDeck, one can imagine how failed earning projections and scandal after public scandal would shake the confidence of even the most savvy investment group.
These monster companies helped usher in the FinTech industry, fleshed out the early years, and fought off regulators on a path to large profits and greater access to funding for everyone. They were the first generation companies to storm the fjord and come out on the other bank.
The juggernauts of online lending soon became like the banks themselves. Internally, they regulate themselves to keep shareholders happy. They know they need to pivot and evolve as the industry matures but they still hold to what made them a success in the first place. Unfortunately for our industry pioneers, companies that are slow to evolve in an industry that was built on speed and revolution is not swift or flexible enough to keep up with the changing atmosphere.
THE HUNGRIER DOG
There are those who study and analyze the good and the bad of these online lenders. While the big companies try to evolve and stay relevant, second generation companies pop up wanting a piece of the market. They tackle the biggest user issues and fix them.
FinTech, as we knew it under the first regime, is dying. Evolution has changed online lending. One example of headaches from users is the idea that they must submit all their information into the internet on a website badged as a respectable company and hope everything is fine. That hope continues as companies everywhere are reporting breach after security breach. Some companies like Magilla Loans removes that fear. They do not ask for personal information. A strong evolutionary response to fear and identity theft.
BANKS STILL RULE
Many online lenders struggle against competition from the big banks. Do not forget the powerful rule of ‘He who has the money makes the rules’. Big banks are unabashedly against the online lending industry because they cannot control the flow of money and the exodus of customers no longer entering brick and mortar branches leaves ghost branches totally void of borrowers. Even as banks struggle with their own credibility and relevance, they still carry a big stick, lobby for regulation, and create obstacles for the online lenders at every corner.
WORK WITH NOT AGAINST
You might ask why banks do not partner with the online lenders? Unlike the Lending Clubs and OnDecks, banks are stymied to the point of virtual paralysis by regulation protecting everyone from customers, themselves, and to the government itself. This makes forward progress very slow. Due to this regulation, banks cannot easily take personal information, like a social security number, from 3rd party sites. That nulls out nearly every online lender except the anonymous ones.
The evolutionary idea of NOT collecting personal information at the point of customer entry helps banks bypass the fear of litigation because they are not obtaining personal information from a 3rd party site. Additionally, the lack of information about the borrower helps avoid discrimination accusations that run rampant in today’s society. This is another step in the evolutionary process. For this new crop of FinTech companies, some have evolved to provide this option.
THE GOOGLE MODEL
Why was the adoption rate with Google so fast? How did they turn a simple search engine into a monolith of technology and thread their way into every facet of our lives?
They gave us everything for free.
Where is the fear of not getting your money’s worth if the cost is zero? Apply the Google Model to online lending and you have a crazy, yet evolutionary idea that brings in a fast adoption rate. Using Magilla Loans as the example, they are free to use. There is no fee for service, no credit card information is asked. There are no hidden fees and no points hidden in the backend of the loan.
What makes the age-old idea of ‘free’ evolutionary is pointing it at the financial industry. Build a company from the borrower’s point of view instead of the brokers. A better user experience gains faster adoption rates and more trust from the user.
DEATH OF THE DINOSAURS
As dinosaurs died out and flexible, agile creatures evolved, eventually they took over as the new leaders in the food chain. FinTech is maturing. The big box stores like Circuit City, Sears, and JC Penney have been dying year after year. Walmart was the evolution of these stores, and it continues to rule the roost.
FinTech is not dying, it is evolving even further, changing the face of lending forever.