Diffusion of FinTech
Diffusion /dəˈfyo͞oZHən/ (noun): the spreading of something more widely.
Watching the 60 Minutes piece last week was an eye opener. It dawned on me that large media brands — like CBS’s 60 Minutes — are just now considering “FinTech” [financial technology] as an industry deserving of coverage. A heavy dose of reality, compared to the daily ongoings here @StockTwits. Not that I’m trying to be a fintech hipster, but certainly, the world hasn’t heard about us before?!
More than anything, the unawareness underlined a central theme I’ve wanted to write about after returning from a recent European speaking tour; information diffusion. After visiting London and Paris, and talking about ‘Emerging Data + Emerging Tech’ it has become increasingly evident to me that New York City an information bubble, and is failing to translate ideas and products abroad. Or to put it in terms of molecular diffusion, New York has a high concentration gradient that isn’t diffusing when it comes to FinTech.
Why? Velocity of diffusion is determined by three factors (converted from molecular to business terms):
- Viscosity of the adjacent market (incumbents, regulation).
- Temperature (i.e. media appetite, funding).
- Size of the particles (the products themselves).
As thing are now ‘heating up’ in the media and funding landscape, the biggest inhibitor for diffusion remains the viscosity of the market. Standouts like OnDeck have jumped this hurdle by partnering with incumbents like $JPM, but otherwise there’s been a big foot-dragging by incumbents on partnering with FinTech companies.
Part of that problem comes from large financial institutions being so focused on their own affairs, that they’ve dismissed upstart technologies that can help them solve their existing problems. But the other side of the coin is that incumbents see us as competitive not complimentary. In a long drawn out discussion with a wealth management group, the conclusion became, “We do this already, it’s called the research department.” Partially true — but way cheaper.
Hopefully the continued temperature rise will reduce the viscosity seen in FinTech, if the trend continues at the rate is is currently, that seems undeniable. We’ve made some headway recently (1, 2, 3), but we’re still really in the first inning of this global diffusion.
France’s FinTech scene is only three years old, and UK FinTech is maybe six years at best?
Listening to prominent speakers in Paris bring up the question of, “So what is Blockchain exactly?” gives me hope really, not doubt. Very little was known about our business, or the rising tide of the #fintechrevolution around us — a topic that xIgntie formally kicked off at Finnovate on September 2015 — but hey, that’s ok. We’re early to the party.
Fick's laws of diffusion describe diffusion and were derived by Adolf Fick in 1855. They can be used to solve for the…en.wikipedia.org
Have some thoughts on this? Drop me a line (or comment) and tell me what you’re seeing.
Couple of events I will be speaking at later this year to put in your calendar:
- June 2nd — QuantInvest (Munich) — Day 2
- July 14th — AI, Machine Learning and Sentiment Analysis Applied to Finance(London) — Day 1
- September 23rd — RiskMinds Americas (Chicago) — Day 3