The Future Of Fintech: The New Normal After The Covid-19 Crisis

The “new normal” in banking and fintech is best understood by starting with a look back at what the “old normal” was.

The Old Normal: Fintech Fetishism

The Oxford dictionary defines fetishism as “worship of an inanimate object for its supposed magical powers.”

That’s a good term for how many people have thought—and still think—of fintech.

There’s a misguided notion held by many that fintech startups are somehow more ethical than legacy banks, or that there is a fintech “ethos” that distinguishes fintechs from banks and makes them morally superior.

I’ve seen this many times from a number of people. Rather than calling them out, here are some examples from various publications (my emphasis and italics):


  • 9to5 Mac reported, “Americans paid $113 billion in credit card interest to banks last year, nearly 50% more than five years ago. So adopting the new fintech ethos of zero fees and transparent pricing makes for thinner profit margins.”
  • Ethical Consumer, a not-for-profit co-operative, claimed that “Monzo is one of the best ethical current accounts” and found “the vast majority of companies in the personal finance sector score badly on ethics.”
  • asserted, “Fintech is better than traditional financial companies because challenger banks focus on securing the data of their clients using technology. Traditional banks are slower than challenger banks in adopting cybersecurity measures.”


Dents in The Fintech Armor

This mindset towards fintech will be irrevocably changed as the result of the Covid-19 crisis. A series of events and occurrences have chipped away at this fintech mindset over the past few months (and year, for that matter):


  • Robinhood’s technical problems. On three volatile trading days—March 4, March 9, and May 18—Robinhood customers experienced outages preventing them from trading. The company is facing lawsuits over these crashes, and is accused of offering a “$75 goodwill credit” to dupe customers into waiving their legal rights.
  • Revolut’s executive exodus. Challenger bank Revolut lost eight top employees between March and May 2020. In 2019, the challenger bank was called out for shady hiring practices and a toxic work culture and accused of ad theft, fabricating data, money laundering, cultivating an exploitative workplace culture, and misplacing a £70,000 money transfer.
  • Monzo’s complaint rate. The UK Financial Conduct Authority released a study of bank customer complaints. Monzo customers registered 4.0 complaints per 1,000 banking/credit card accounts. In comparison, Co-op Bank had 3.3, Lloyds had 3.5, and Cumberland Building Society 0.2.
  • Fintech lender layoffs. In April, small business lender Kabbage cut off credit to its small-business clients and furloughed a “significant number” of its 500 US-based employees. In addition, Lending Club announced that it was laying off 460 people, roughly 30% of its staff.


So much for the fintech “ethos.”

The Misguided Views of Technology Optimists

Why do people have a fintech fetishism?

The answer can be found in a study titled The Technology Effect: How Perceptions of Technology Drive Excessive Optimism. The authors conclude:

“There is a tendency toward excessive optimism involving technology. Because technological successes often produce dramatic and memorable results, such as revolutionizing industries, such events are highly salient. People develop a non-conscious or implicit association between technology and success. This technology effect has at its core overoptimism or overconfidence.”

This excessive optimism is understandable: There’s a strong desire among some people to see the world become a better place, and to see perceived wrongs righted.

This excessive optimism isn’t realistic, however, because it ignores human nature.

The notion that fintechs have a higher “ethos” or ethics than traditional banks is ludicrous. Fintechs were started by humans—and humans are fallible. Even fintech founders can become embroiled in sex scandals or deceive customers.

Fintech Pessimism Versus Fintech Realism

People who aren’t technology optimists—as defined by the study—aren’t necessarily technology pessimists, however.

There’s another dimension at play here—realism (or rationality). Someone can be realistic (rational) or unrealistic (irrational) about the impact of technology.

You can be realistically optimistic about the impact of fintech, or you can be unrealistic about it—like expecting fintechs to hold to a higher moral standard than traditional financial institutions.


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