Fintech's Promise: The Unvarnished Risk Data - Twitter Reacts

Fintech's "Creative Destruction": Hype vs. Reality

The Fintech Promise vs. the Data Anna Paulson, Philly Fed President, recently hosted a fintech conference themed around "Harnessing the Benefits, Minding the Risks." The usual buzzwords were present, including Schumpeter's "creative destruction." But how much destruction—or creation—is fintech *actually* delivering? The data, as always, tells a more nuanced story than the headlines. You can read more about the conference in Harnessing the Benefits, Minding the Risks of Fintech Innovations - Federal Reserve Bank of Philadelphia. Paulson cited research suggesting about 25% of innovation comes from creative destruction (from 1983 to 2013). That's a sizable chunk, but the majority—75%—still comes from improvements by existing firms. Are fintech startups truly disrupting the old guard, or are they mostly nibbling around the edges? My analysis suggests the latter, at least so far. One Philly Fed study highlighted banks partnering with fintechs offering larger credit lines to customers with thin credit files. Sounds great, right? But let’s dig a little deeper. The study also mentioned improved credit risk assessment. Which begs the question: Were these "underserved" customers *actually* creditworthy, or were the fintechs just better at identifying those who could handle *slightly* larger debts *without* significantly increasing risk? It's about risk *management*, not necessarily risk *elimination*. And if the risk assessment improved, what was the *actual* increase in credit lines offered? The report doesn't say. A study in India showed expanded access to credit, especially among subprime borrowers, due to broadband and digital payments, *without* increased default rates. Again, promising. But what *kind* of credit are we talking about? Microloans? Payday advances repackaged as "fintech solutions"? The devil, as always, is in the details. And what's the long-term picture? Has this increased access to credit led to genuine economic empowerment, or just a cycle of debt for vulnerable populations?

Amish Fintech: Innovation in Unexpected Places

The Amish Exception: Innovation Where You Least Expect It Then there's the anecdote about a community bank in the Third District accommodating the Amish community with horse-and-buggy-friendly drive-through lanes and mobile banking units. This is the part of the report that I find genuinely puzzling. Is this *fintech*? No. Is it *innovative*? Absolutely. It's a perfect example of adapting existing technology to meet the specific needs of a community, even if that community isn't exactly on the cutting edge of digital adoption. This raises a fundamental question: Are we so fixated on the *technology* aspect of fintech that we're missing the bigger picture – which is about *access* and *inclusion*? The Amish example highlights that innovation doesn't always require complex algorithms or blockchain. Sometimes, it just requires understanding your customer and adapting your services to meet their needs, even if it means designing a drive-through for a horse and buggy. The article about Paulson's speech received 3,584 views. A decent number, but hardly viral. Does this reflect a lack of public interest, or simply a failure to cut through the noise? It's hard to say. But it does suggest that the message isn't resonating as strongly as some might hope. So, What's the Real Story? Fintech undoubtedly has potential, but the data suggests we're a long way from "creative destruction." It's more like "creative *adaptation*," with existing institutions slowly incorporating fintech solutions to improve efficiency and manage risk. The real innovation might lie not in the technology itself, but in understanding and serving the needs of *all* communities, even the ones that aren't glued to their smartphones. And that, ironically, might be the most disruptive force of all.