Betting On Marginal Advantage
A Look At The State Of Financial Technology (FinTech) Today
We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run — Roy Charles Amara
Change, like growth, is rarely linear. While technology has continued to eat the world, financial technologies are yet to mature and scale up. As Robinhoods’ foray into deposit products in 2018 revealed, it is not easy to enter regulated markets. Understandably, regulations are designed to protect the common man. In December 2018, Robinhood communicated the roll out of a high yield deposit product (3%) which wasn’t insured by the Federal Deposit Insurance Corporation (FDIC) as is the case with deposit products offered by most banks. In its communication, Robinhood stated that the SIPC (Securities Investors Protection Corporation) insures its deposit products up to $250,000. SIPC responded by saying Robinhood did not contact it prior to roll out and that it insures deposits only if they are placed with a broker for the ‘explicit’ purpose of investing in securities.
As Financial Technology companies mature, they have entered into partnerships with incumbent financial services providers to learn to scale and deal with complex…
