Nearly every industry has undergone some form of digital transformation. For years, and accelerated by COVID, retailers have been shifting from the traditional “brick and mortar” business model and, instead, adopted an e-commerce strategy that appeases their customers buying journey. This has given rise to technology giants like Twilio and Snowflake, which enable retailers to have better solutions for the storage and usage of their data, across all areas of their business. Other industries, like oil and gas, have seen hardware automation vendors deliver new technology solutions that provide seamless visibility to processing and supply chain considerations along their value-stream. These solutions address a series of challenges that have plagued these organizations for decades and offer substantial returns on their investment that will continue in perpetuity for many years to come.
Although many industries have been swept up in the wave of “digital transformation”, one of the most intriguing industries for insurance executives is financial services. Unlike other segments of the technology industry, financial services technology (FinTech for short) has disrupted a highly risk averse industry with innovative ideas that displace the long-standing technology solutions that institutions have death gripped over the last two decades. The team at Coatue Capital said it best in their latest review of the FinTech market:
“Those of us who have been investing and operating in FinTech for a long time share the unanimous opinion that disruptive technology companies are speeding past the incumbents to create new models of financial services giants.”
Statements like this come on the heels of a 20x rise in FinTech investment over the last decade. With the financial services industry estimated at a $16 Trillion market cap, software titans and startups alike are receiving financial backing from venture capital and private equity funding to build solutions that tap into this tidal wave of opportunity.
Accelerated by COVID, FinTech point-of-sale (POS) software companies recognized colossal growth as contactless pay demands became a necessity for retail and restaurant vendors. FinTech companies that support e-commerce and micro-financing at checkout saw huge surges in investment and market capitalization, as buying habits for consumers shifted to become predominantly online. All of this has culminated in the proliferation of the FinTech market and the adoption of technology across financial institutions and ancillary industries, so: What does this mean for the insurance industry?