There is something to the sceptics claims about fintech
Banking expert Martin Walker has written a guide to help clear through the fintech mud.
Like any nascent industry, fintech has its sceptics. It is a vacuous buzzword; the companies are unprofitable; it has peaked - everyone in the industry has heard criticisms such as these.
But do the sceptics have a point?
According to Martin Walker, Banking and Finance Director at the Center for Evidence-Based Management, they are at least partly right.
In a new article titled, ‘Seven signs of overhyped fintech’, Mr Walker argues that some fintechs solve fake problems, others are pointlessly complicated and many add no improvement to new technologies.
One fake problem solver, he believes, is bitcoin. Which is “perhaps the best example of claiming credit for a problem that did not exist.”
“Bitcoin enthusiasts claim it solved the ‘double spend’ problem. A music MP3 can be copied multiple times so how do you stop digital money being spent multiple times? Very simple, you do not create a form of money that lacks a central authority.”
Blockchain is another culprit, Mr Walker claims, as it fails to explain what exactly its business proposition is and where exactly it integrates into existing tech systems.
“Even the most amateurish Blockchain solution… can re-implement pretty much anything in the financial system. The big question is whether you have re-implemented in a way that is cheaper, quicker or more secure.”
But Mr Walker reserves most scorn for fintechs that dismiss criticism or tell investors that they do not need to understand how their technology works.
“Human beings unsuccessfully worked for centuries trying to turn lead into gold, until they invented the IPO. For technologies that genuinely add value, asking questions, even being critical, are key to helping turn an immature idea into a mature, useful product.”
Correction: A previous version of this article confused Martin Walker, the Banking and Finance Director at the Center for Evidence-Based Management, with Professor Martin Walker, an LSE finance professor.