Navigating the Contested Rise of Fintech

Fintech — it’s the word that quickly shortens the broad swath of emerging financial technologies into one. With trust in traditional banking practices stalling, fintech may be a disruptive threat, but it also represents an opportunity for established players to reinvent themselves and rejuvenate a battered industry.

Yet, fintech’s rise has received a mixed welcome. Stakeholders such as regulators, competitors, industry analysts, and customers experience different threats and prospects from fintech. For instance, fintech may create value for consumers with its cheaper and more convenient financial solutions, but banks may face the risk of over 40% of their revenues being threatened by new players. In turn, regulators grapple with the need to devise post-disruption regulatory frameworks, after decades of failing to manage the financial sector when it was dominated by traditional practices and simpler technologies. Meanwhile, the underlying technological innovations represent an opportunity for analysts and consultants to sell expertise and advice at a premium.

This varied reception suggests that despite increasing attention to fintech, its expected promise or peril is still heavily subjective. So how can managers navigate the uncertainty stemming from fintech, and make timely decisions to adopt — or not?

Based on our ongoing research of fintech-adoption decisions by banks in Europe over the last 15 years, we’ve found that the decision to adopt new financial technologies is less about the technology itself, and more about the stakeholder discourse surrounding the ongoing disruption. Our research shows that managers who want to successfully navigate fintech’s ongoing technological disruption need to understand stakeholder debates around its disruptive potential, analyze group motivation for change, and proactively discuss technology adoption.

The Uncertainty of Adopting New Technologies

Fintech’s mixed reviews, as with most new technologies, come from poor understanding of its long-term technical and economic merits. This is particularly the case when the disruptive core technologies, such as blockchain, have multiple designs and applications not exclusive to the financial industry. Many managers may not be able to answer the question: How will blockchain affect your specific organization?

Despite this uncertainty, the decision to adopt a potentially disruptive technology often cannot be postponed, and historical cases abound showing the perils of companies slow to embrace change.

Further complicating matters, it’s not necessarily the best technology that becomes the next industry standard.