Fintech, a word, first adopted by the Financial Technology Monitor in 2003 to describe the performance of tech-enabled Finance companies, had its origins in 1866 with the transatlantic cable. The interconnectivity facilitated transmission of sensitive political and business data through secured lines. It was not until 1957 with Amex Cards that the first charge card came to existence offering millions to leverage their income. Barclays’ ATMs (1967) that were emulated by competitors and customized to each country’s rules on cash disbursement offered citizens a frictionless access to cash. However, true global payment settlement happened with the adoption of SWIFT in 1973 that enabled global businesses to transact through a reliable messaging system that tracked the origin, transmission, and settlement of payment.
In this in-depth analysis of the FinTech industry, we cover:
- How Fintech disrupted traditional banking (Post-2008)
- Fintech Functions and Career Opportunities for Management Professionals
- Career Opportunities in Fintech for MBAs
- MBA Programs with Best Fintech Placements
- MBA Programs with Best Fintech Curriculum
- Top 5 VC-funded Fintech Companies
How Fintech disrupted traditional banking (Post-2008)
Although the ease of payment supported businesses and high-income individuals, the 2008 financial crisis was a wakeup call on the absurd risks and the low consequence bankers faced while disrupting global financial systems. The origin of bitcoin, crowdfunding and P2P lending all began post-2008 with a demand for a democratized ‘money.’ The widespread adoption of mobile phones, specifically touch phones from 2011, germinated a new breed of companies that provided banking & trading access to all at the palm of their hand. Rural areas that were disconnected and lacked banking solutions soon had access to financial data and sophisticated products catering to their specific needs.
For the middle-income households, the wide-scale adoption of cloud computing, artificial intelligence, machine learning, natural language processing (NLP), blockchain, and mobile technology has accelerated the adoption of Fintech and trading products. The evolving security innovation to mitigate the risks of tokens aside, FinTech is meeting a need that traditional banks couldn’t meet from 1970 to 2014.
The customer-centric approach has encouraged the majority to favor FinTech (80%) over traditional banks (53%). Despite access to credit history, traditional bank’s bureaucratic DNA is no match for the “break-first, innovate and iterate” approach that FinTech startups have adopted. Artificial intelligence has increased fraud detection through the analysis of customer spending patterns and blockchain technology has made ledgers more trustworthy for cross-border transfers.
By emulating gamification strategy used by FinTech companies, migrating from legacy systems, and increasing their presence with omnichannel marketing, traditional banks are catching up.
Fintech Functions and Career Opportunities for Management Professionals
Broadly, FinTech can be classified into four functions: Digital Lending, E-Wallets & Payments, Blockchain, and Digital Wealth Management.
• Digital Lending
Digital Lending covers a broad range of unique features from minimal human interaction to size of the loan, to mobile-only platforms to speed of verification & disbursal. At its core, digital lending integrates digital channels (mobile and desktop), digitized data (central repository on customers – government/private) and customer experience (pricing and process) to offer a personalized lending experience. As user and credit profiles are integrated securely to third-party services, customized products, catering to a larger segment of customers will become available. The business model is ripe to disrupt traditional banking services that has failed to offer customized products despite sitting on terabytes of customer data and intelligence. Consultants and Marketers with experience in brand management and developing omnichannel campaigns could contribute the most in this niche. Product Managers with visionary ideas on disrupting and upending existing models of Digital Lending process could also serve best in this function.
• E-Wallets & Payments
Starting off as a convenient tool to complement banks, E-Wallets and Payment services are now directly competing with traditional payment methods. QR Code-enabled payment services are viable replacements for credit and debit cards. Regardless of the innovation, brands still matter as the proliferation of E-Wallets have fragmented the market. Customer still rely on traditional banks with brand visibility for consequential transactions. E-Wallets and digital Payment adoption have triggered innovation in two opposite direction – increasing access to traditional banking services for rural customers in emerging economies and adoption of E-Wallets as a complementing service in developed economies. Eventually, each country’s regulatory environment and adoption of blockchain technology will determine if real-time payment – the biggest selling point for E-Wallets could be scaled to international, high-value, and for transactions in sensitive categories. The regulatory hurdle and evaluating each government’s monetary policies is a big opportunity for consulting engagements. Candidates with a background in Law and Government could pivot to this niche.
• Blockchain
An innovative by-product of cryptocurrency, as of 2022, the immutable record-keeping technology is actively developed or completed in real-time money transfers(local and international), exchanges (payment settlements and ledgers), lending (customer verification), insurance (customer profiling and fund disbursement rules), real-estate (ownership management), personally identifiable information(securely storing customer information), social benefits (identifying and distributing govt. benefits), creator economy (rewarding creators with micropayments), NFT (exclusive access to creator’s artifact), supply chain tracking, IoT, and data storage. As a consultant or a strategist, the diverse industries the technology serve offers the best bet for management professionals to secure a career for the next 15-25 years.
• Digital Wealth Management
The function saw the most resistance in adopting AI, and FinTech services as the affluent investors care more about preserving the wealth over pursuing aggressive growth targets. However, client onboarding has moved predominantly to digital processes. Apart from a few wealth management services that has incorporated AI to serve detailed asset allocation plan based on risk and goals, the majority still rely on one-on-one in-person relationship and a generic portfolio suggestion on risks and the size of the fund. With the reward of a ransomware attack proportionally higher for wealth management accounts, the industry is hesitant to integrate all their functions into one product until security is strengthened across the Digital Finance ecosystem. As of 2022, the risk is remediated by operating public-facing FinTech products as a standalone analytics platform with limited integration to core wealth management functions. In the future, as clients become familiar with the digital ecosystem, demands to seamlessly manage cash, securities, real estate, cryptocurrency, and T-Bill under one wealth management account will emerge. Management professionals with specialized expertise in change management, product management, and regulation would be in demand when an end-to-end integration is facilitated in the Wealth Management industry.
Career Opportunities in Fintech for MBAs
Analyst
There are three dimensions that an analyst role can take at a Fintech firm – financial, business, and quantitative.
Financial analysts study different start-ups from the perspective of an investor and forecast their returns based on a selection of variables.
Business analysts study the cumulative strategy to identify areas where resources are optimized, and efficiency can be improved.
Quantitative analysts study algorithms and implement data frameworks to automate rules that leverage large financial dataset.
The average salary for a Business Analyst is $85,000 whereas for Quantitative Analysts it is $150,000.
Advisory and (Innovation) Consulting
Consultants and advisors play the crucial role of objectively evaluating (scope the market and research) to enable the financial institution to digitally innovate its processes. The best Fintech consultants can address their client’s pain points, assess business and operating model viability, and help them navigate through future innovations.
Mergers and Acquisitions are on the rise as traditional financial institutions engulf software-as-a-service Fintech firms to streamline their own processes, creating opportunities for advisors to evaluate and assess the best fit for these financial institutions.
The entry-level salary begins at $82,500, averages at $125,000 with experienced professionals earning $190,000, annually.
Risk, Regulation, and Compliance
The roles for risk, regulation, and compliance involve keeping updated with evolving industry regulation requirements, managing financial crimes by having set processes such as KYC and AML (anti-money laundering), developing a credit risk assessment matrix, and analyzing the credit risk through innovative digital tools.
Salaries for such roles are typically around $105,000.
Product Manager
Fintech companies usually have a lean team. Product managers should be aware and willing to participate in business development discussions and pitching to investors. The role involves driving sustainable innovation, increasing brand visibility in the Fintech ecosystem, monitoring several product metrics, and providing new, unconventional ideas sourced from accelerators and research laboratories.
The salary for product managers at Fintech firms at entry-level is $125,000, average at $150,000 while most experienced professionals make $180,000.
| Role | Entry-level Mean Salary | Mid-Level Mean Salary | Mid to Senior Level Mean Salary |
|---|---|---|---|
| Business Analyst | $85,000 | ||
| Quantitative Analysts | $150,000 | ||
| Consultant | $82,500 | $125,000 | $190,000 |
| Risk, Regulation, and Compliance | $105,000 | ||
| Product Manager | $125,000 | $150,000 | $180,000 |
MBA Programs with Best Fintech Placements
London is the leading global Fintech hub with 2,500 fintech companies registered, out of 6,500 global companies, attracting $18 billion worth of venture capital funding in the first half of 2021 (UK’s Digital Economy Council).
| School | Percent Hired | Median Base Salary | Median Sign-on Bonus |
|---|---|---|---|
| London Business School | 6.0% | $88,843 | $43,551 |
| Kellogg School of Management | 1.5% | No Data | No Data |
| INSEAD | 1.3% | $91,500 | $6,400 |
| University of Pennsylvania Wharton Business School | 1.2% | $140,000 | $25,000 |
| Columbia Business School | 1.0% | $125,000 | $45,000 |
| University of Chicago Booth School of Business | 0.9% | No Data | No Data |
50% of London’s Fintech firms focus on WealthTech and cryptocurrencies.
6% of London Business School candidates chose careers in Fintech, leading the rankings for MBA programs with the best Fintech placements. Although no data was available for Oxford and Cambridge, they do have learning opportunities in their curriculum (captured below).
Among the top US programs, Kellogg School of Management leads with the highest percent of hires showing that that trend is beginning to catch on across the Atlantic. Wharton leads with the highest median base salary in Fintech of $140,000 and Columbia Business School graduates acquired the highest median sign-on bonus.
MBA Programs with Best Fintech Curriculum
Within the UK, Oxford, Cambridge, and Imperial College MBA programs offer Fintech electives within the MBA curriculum. Imperial College Business School is the only business school that currently offers an MSc in Financial Technology (Fintech).
The presence of Fintech at MBA programs in the US has begun, with only NYU Stern and Duke’s Fuqua offering Fintech concentrations.
Columbia and Wharton include Fintech electives in their finance programs.
SC Johnson College of Business offers a 7-week intensive program in Fintech for the one-year MBA. MIT Sloan offers Fintech Ventures within the finance track and holds conferences, business plan competitions and a Fintech Hackathon. The presence of fintech at the other top US MBA schools like Darden, Haas and Michigan Ross is primarily in student-run clubs involving seminars/talks/conferences by Fintech professionals and resources for students to develop their foundations.
| School | Concentration / Elective / Experiential Learning Course Name |
|---|---|
| Oxford Said Business School | Fintech: Present and Future: London (International Elective) |
| Cambridge Judge Business School | Fintech Strategies |
| Columbia Business School | FinTech: Consumer Financial Services |
| Columbia Business School | Creative Destruction in Financial Services |
| Columbia Business School | Entrepreneurship & Innovation in Financial Services: Fintech, Private Equity, and Venture Capital Perspectives |
| NYU Stern School of Business | Fintech (concentration) |
| SC Johnson College of Business | One-Year MBA Fintech Intensive |
| MIT Sloan | Fintech Ventures (within finance track), Business Plan Competition, Fintech conference and fintech Hackathon |
| University of Pennsylvania Wharton Business School | Fintech (MBA finance course) |
| Duke's Fuqua School of Business | Fintech (concentration) |
Top 5 VC-funded Fintech Companies
The first quarter of 2021 was the largest in terms of Fintech funding compared to the previous two quarters, amassing $22 billion in over 614 deals. Mobile digital banking is the largest VC-funded sector amongst the top 250 Fintech companies.
Brazil is the only emerging economy to feature among the top 5 VC-funded FinTech companies. The remaining are from the UK, US, and Sweden.
Klarna is disrupting traditional debit/credit cards, allowing users to pay for their shopping in 4 installments by simply scanning QR codes on their smartphones.
| Top 5 VC-Funded Fintech | Category | Total Disclosed Funding ($ billion) | Country |
|---|---|---|---|
| Klarna | POS & Consumer Lending | $3.50 | Sweden |
| Stripe | Payments Processing & Networks | $2.90 | United States |
| Chime | Mobile Digital Banking | $2.60 | United States |
| Nubank | Mobile Digital Banking | $2.50 | Brazil |
| Revolut | Mobile Digital Banking | $1.70 | United Kingdom |
How Schools can improve their Fintech Curriculum
The curricula at the top business schools focus on the technologies employed by Fintech such as artificial intelligence, blockchain technology, and quantitative analyses of Data. However, top Business Schools need to include a cross-industry approach where financial aggregators, banks, insurers, and non-financial parties integrate, unearthing ecosystem-based financing opportunities.
Decentralized Finance and Sustainable Fintech are two other emerging areas that schools can offer expertise in. Software-as-a-Service and serverless architecture is transforming Fintech as it frees up time and resources with the added benefit of flexible scaling. However, with changing regulations on where and how data can be stored, it is imperative for schools to offer Change Management expertise in FinTech.
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References
1. FinTech: Evolution and Regulation (Professor Douglas W. Arner)
2. How Retail Banking Must Rethink Customer Relationships
9. Wealth and Asset Management 2022: The Path to Digital Leadership
