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Is Silicon Valley the Future of Finance?

Is Silicon Valley the Future of Finance NYMag


Financial start-ups—known collectively as “fintech”—are spreading like kudzu, each with a different idea about how to usurp the giants of Wall Street by offering better services, lower fees, or both. Bitcoin and other digital currencies are the tech scene’s infatuation du jour. But a number of other companies are finding success by innovating within the monetary system we already have. “When I go to Silicon Valley … they all want to eat our lunch,” lamented ­JPMorgan Chase CEO Jamie Dimon this year.

Part of the reason the tech world is interested in finance is the sheer amount of money involved—financial services is a $1.2 trillion industry, and U.S.-based fintech start-ups raised an estimated $1.3 billion last quarter alone. But banking is also a prime candidate for disruption because, like much of the old-line corporate world, it tends to run on bloated, creaky technology. Even something as simple as applying for a loan can take weeks or months, thanks to the sheer number of human hands such transactions pass through. And, since each intermediary wants a cut, fees are everywhere. Undercutting big banks and speeding up processes might not be as sexy as, say, creating the next Snapchat, but it’s low-hanging fruit for techies who want a way in to a lucrative market. 

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The key challenge is regulation. That will slow down all the fintech companies.

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