Smart Business
(by Sue Ostrowski featuring Moore Capito)
For years, the banking industry has functioned in the same ways it always has. But FinTech — financial technology — is revolutionizing the way things are done and increasing access to financial tools for those who may not have previously had it.
“At its core, FinTech is when you have the convergence of an emerging technology and a financial service,” says Moore Capito, shareholder at Babst Calland. “It’s using innovation to compete with traditional methods of delivering financial services.”
Smart Business spoke with Capito about how FinTech is revolutionizing the financial industry, the opportunities it presents and challenges it poses.
How is Fintech Changing the Financial Industry?
There are a lot of unbanked, or underbanked, people that have difficulty accessing the traditional banking industry. FinTech products, sometimes in collaboration with a traditional bank, can provide better financial services to these individuals, especially in rural areas where there is less access to bricks-and-mortar banks.
There are potentially endless applications, from insurance to mobile banking, cryptocurrency, investment apps, and financial products including mortgages — the most well-known being PayPal. The onset of COVID accelerated the necessity and the willingness to adapt with FinTech, doing more transactions remotely from phones and bringing finance directly to individuals, instead of individuals going to a physical banking location.
On the economic development side, entrepreneurs are coding programs that create the functionality behind the apps. And states such as West Virginia have created regulatory sandboxes for FinTech entrepreneurs. These let participants apply to come in and test their products in the marketplace without going the traditional regulatory route, allowing them to become viable and ready for commercialization before becoming regulated by state agencies. It gives them two years to be able to exist with greater leniency and more flexibility, to be leaner and nimbler to develop their products.
What are the Challenges of Fintech?
Traditional finance wants to protect itself against changes to how it operates, which can be a challenge. In a lot of states, the banking industry is slow to move. It’s a conservative industry, and it is hesitant to accept change. It has resisted for a long time because emerging technology can be disruptive.
However, we need to be engaging with startup businesses that are innovating. We are living in a changing market, and we need to lean into these changes that are not only moving the industry forward but that are creating jobs. Disruption can be scary for big, entrenched industries. But while it can be intimidating, rising tides lift all ships and everyone becomes better as a result.
The second challenge is to ensure the consumer is protected. By their very nature, some startups fail, and we need to ensure no consumers are hurt in cases where a business doesn’t get off the ground.
What Does the Future of Fintech Look Like?
It’s unbelievable how quickly it’s continuing to grow. Even with a recent downturn in the economy, we’ve seen increased investment; the venture capital community is investing billions of dollars in a year where there has been quite a bit of handwringing. While technology and disruption can be scary, these products, once tested and trusted, create conveniences that are making people’s financial lives happier and healthier.
The entrepreneurial community in the FinTech space is very vibrant, and they are attracted to places that want them. We have created a very welcoming and forward-thinking space for entrepreneurs that only not serves the state and the wider region, but that also has a global impact.
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