The World Economic Forum has released a report titled Beyond Fintech: A Pragmatic Assessment Of Disruptive Potential In Financial Services. The culmination of three years of research into the transformation of financial services, the document constitutes a pragmatic assessment of disruptive potential in financial services.

Main findings suggests that if on one hand fintechs have seized the initiative – defining the direction, shape and pace of innovation across almost every subsector of financial services – and have succeeded as both stand‐alone businesses and crucial parts of financial value chains on the other hand they have reshaped customer expectations, setting new and higher bars for user experience. Through innovations like rapid loan adjudication fintechs have shown that the customer experience bar set by large technology firms, such as Apple and Google, can be met in financial services.

However, customer willingness to switch away from incumbents has been overestimated. Customer switching costs are high, and new innovations are often not sufficiently material to warrant the shift to a new provider, especially as incumbents adapt. On top of that, fintechs have struggled to create new infrastructure and establish new financial services ecosystems, such as alternative payment rails or alternative capital markets. They have been much more successful in making improvements within traditional ecosystems and infrastructure.

Therefore, according to the WEF, fintechs have materially changed the basis of competition in financial services, but have not yet materially changed the competitive landscape. Nevertheless, although fintechs have failed to disrupt the competitive landscape, they have laid the foundation for future disruption. 

Equity Crowdfunding: Regulation Will Shape the Future

With regard to equity crowdfunding, the reports points out that the industry is growing but is still in its infancy and regulation will dramatically shape its future.

In particular, platforms have grown rapidly, driven by strong demand from both investors and entrepreneurs while the quality of regulation has been a defining factor in its success.

However, the crowd has proven less wise than expected, highlighting the need for further education and commercial due diligence tools to assist investors.

Moreover, it still remains disconnected from the broader financial system, limiting its long‐term scalability.

Download the full report here.