Disruption vs. Integration

Finding the right balance for fintech

In a recent O’Reilly report, I riffed on the tension between disruption and integration, noting that both are necessary to achieve progress that is both durable and genuinely transformational.

The problem today is that we tend to fixate on disruption, and we often overlook or minimize the importance of integration and continuity.

Here’s a snippet from my report on the evolving architectures of fintech:

Fintech is often reduced to breathless sound bites, such as, “It’s like having a bank in your smart phone!” or “By this time next year, no one will be carrying cash or writing checks!”
But the fintech phenomenon is broadly misunderstood, mainly because “disruption” is a sexier headline word than “integration.” In the vast majority of cases, fintech solutions will be integrated with existing systems of hardware and software.

The key takeaway is that substantive progress in fintech will involve brief flashes of disruption followed by long periods of integration. The disruptive moments will be more exciting and generate more headline, but the real work will be done during long and tedious months of integration.

The good news is that the time and money you spend integrating new cool tech with existing systems will pay dividends. I’m not saying that fintech is over-hyped or not worth the effort— I’m saying that it will take real work to embed fintech into existing financial services architectures.

From the perspective of fintech developers, the challenge is integrating new software with old systems. From the perspective of financial services institutions, the challenge is providing operating platforms that are friendly to developers.

In other words, banks and other financial services companies need to make life easy for fintech developers. Again, I believe that efforts to create user-friendly fintech development platforms will be rewarded generously. Here’s why:

Although fintech is only one piece of the global financial services ecosystem, it is rapidly evolving into something on the scope and scale of social media and online search.
In the same way that email “killed” snail mail, fintech will render some forms of banking either less important or completely irrelevant. At minimum, it will fundamentally alter the way we relate to the numerous financial systems that support and surround our daily lives.

If you’d like to read the full report, you can download it absolutely free of charge from the O’Reilly Media website. Thanks, and enjoy!

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