Monday, May 2, 2016

FinTech

There is quite a bit of talk going around the internet today regarding "FinTech", or financial technology.  This can be attributed to a recent 60 Minutes episode which can be seen here, and this article published over at Bloomberg regarding "blockchain" technology.

This is a rather large industry overall as it encompasses not only traditional banks to a degree but also credit card companies, transaction processors, financial services, P2P payment, and P2P lending companies. An example of each respectively would be Wells Fargo, Visa, Global Payments, Fiserv, PayPal, and Lending Club.

The 60 Minutes interview portrayed the industry as an all out assault against traditional banking. That's not entirely accurate. Big banks are under attack in a sense, but right now the incumbents enjoy quite the secure position. Also it seems to downplay any initiatives they take to defend their turf, or acquire any competitors with their cash hoards.

One thing to note is the financial industry(banks) has really lagged the overall market since 2014. Also banks are nowhere near their pre-reccession highs despite the index already surpassing it's historical high. "FinTech" competition could be one reason why as long term investors begin to factor this into consideration, and hence lower expectations. Personally I think that's a small part of the overall equation as in less than 5%.  Here is the chart comparing the XLF vs the S&P 500 since 2001.



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