Every day we look to portable and on-the-go technology to make our lives as easy as possible. From selling and shopping to research and communication, many activities have been made more accessible to us thanks to the development of technology and increased internet accessibility. Having witnessed how the internet carried forward millions of platforms, tech startups went on to examine other avenues, and the exploration into financial technology, or fintech, began.
No longer just the concern of banks and building societies, customers are now turning to fintech to manage their money and online payments. As our use of technology increases on a daily basis, customers are looking to avoid the frustrations of managing their banking in person, trying to avoid frustrating and time-consuming visits to the bank. This is where new fintech companies, such as PayPal or WePay have stepped forward.
One of the many reasons customers are now turning to fintech companies is the reassurance that their personal banking details will be kept safe. With each and every online transaction requiring the input of banking and credit card details, consumers are becoming wary of handing over such sensitive information to multiple websites, particularly in response to an ever-increasing number of identity and financial thefts. Fintech companies provide security for clients and customers, as placing important information in the hands of one secure company is far more reliable than sending it to multiple online retailers whom they may know very little about.
From the very beginning, PayPal took the lead at the front of the fintech market. Founded in December 1998, eBay bought the company in stocks for over £600,000,000. Fast forward to 2015 and the company boasts 173 million customer accounts and processed 4 billion payments in 2014 alone. Whilst PayPal previously had primary control over the industry, more and more fintech startups are developing across the globe, accessing and exploiting the areas of the market PayPal has yet to dominate. These startups are beginning to move customer banking away from the high-street, and onto the internet. As the market continues to expand, many companies are vying for PayPal’s crown.
To examine how startups are looking to fill gaps in the financial technology market, we must first look to where these gaps are. The crowd sourcing community is constantly evolving and increasing, with companies such as Crowdrise, Indigogo and GoGetFunding making it quick and easy to set up simple online donation campaigns. The unequivocal leader of the crowd sourcing pack, however, is GoFundMe. The California based company raised over £100,000,000 in the fourth quarter of 2014 alone, increasing its total takings to over £300,000,000 for the year. Customers use the service to raise money from everything from charity events to life-saving medical supplies.
US Company, WePay, is one such company who sought to exploit this gap. A young company compared to PayPal, the service was co-founded by Rich Aberman and Bill Clerico in Red Wood City, California, in 2008. Seeing an area that PayPal had yet to control, the company decided to focus its attention on this gap in the fintech market. In response to this ever growing online phenomenon, WePay positioned itself as one of the leaders in online banking transactions. Developing at a competitive speed with the companies it works with, co-founders estimated that the business had the potential to triple its revenue in 2015. The company saw a niche they could exploit, and founders soon suggested ‘what online shopping did for PayPal, the rise of the GoFundMe economy seems to be doing for WePay’.
Starting out as a way for multiple customers to group payments and donations together, the company now focus primarily on collecting funds from a larger number of customers, and delivering them to a smaller number of recipients. From their beginnings in the late noughties, the company generated over £16,000,000 in revenue 2014, a staggering increase of 4,354.5% from 2011. In 2014, Forbes online placed it in the ’15 Fintech Startups To Watch in 2015’, and recent research suggests that the company is now worth over £145 000,000. A number that is only set to rise with the evolution and expansion of the crowd funding community.
With the internet and mobile technology leading the way in almost every aspect of our day to day lives, it was only a matter of time before our finances got the same treatment. The Fintech sector will disrupt traditional business models in industries like wealth management and banking. Its rising status may pose challenges from the onset, but it will also create opportunities for many new and existing players in the financial sector.
By Rebecca D’Souza, Ramsey Crookall.