Marc Andreessen famously declared that “software is eating the world.” Nowhere is this more evident than in financial services, where a wave of fintech companies has fundamentally changed how people interact with money.
The Unbundling Thesis
Traditional banks are bundles of services: checking accounts, savings, loans, credit cards, wealth management, payments, and more. For decades, customers accepted this bundling because the alternative—maintaining relationships with dozens of specialized providers—was impractical.
Fintech unbundled the bank. Stripe handles payments. Robinhood democratized trading. Affirm offers point-of-sale lending. Chime provides fee-free checking. Each company attacks a specific piece of the banking bundle with a superior, focused product.
This unbundling was enabled by two technological shifts:
-
APIs and infrastructure-as-a-service: Companies like Plaid (account connectivity), Marqeta (card issuing), and Galileo (core banking infrastructure) provide the building blocks that let fintech startups launch without building everything from scratch.
-
Mobile-first distribution: Smartphones gave fintech companies a direct channel to consumers, bypassing the branch networks that traditional banks spent decades building.
Where Fintech Wins
The best fintech products share common characteristics:
Radical simplicity: Traditional banking interfaces were designed for branch employees, then awkwardly ported to the web. Fintech products are designed mobile-first for consumers. Venmo made sending money as easy as sending a text. Cash App made investing as simple as buying a coffee.
Transparency on fees: Banks made billions from fees that customers didn’t understand—overdraft fees, foreign transaction fees, minimum balance fees. Fintech companies built brands by eliminating or clearly disclosing these fees. When Robinhood launched commission-free trading, it forced the entire brokerage industry to follow.
Speed: Why does an ACH transfer take 3-5 business days? Because the underlying infrastructure was built in the 1970s. Fintech companies like Wise and PayPal offer instant or near-instant transfers by operating on top of traditional rails while masking their slowness.
The Limits of Disruption
But fintech hasn’t replaced banks, and it probably won’t. Several factors protect incumbents:
Regulatory moats: Banks have charters that allow them to hold deposits, issue loans, and create money. These charters are difficult and expensive to obtain. Most fintech companies operate as technology layers on top of partner banks rather than as banks themselves.
Trust and stability: When the economy contracts, customers flee to established institutions. SVB’s collapse in 2023 showed that even sophisticated tech customers prioritize safety over convenience when things get scary.
Credit risk expertise: Lending money is hard. It requires underwriting expertise, capital reserves, and the ability to weather credit cycles. Many fintech lenders that thrived in the low-rate environment of 2020-2021 struggled when rates rose and defaults increased.
The Rebundling
Interestingly, successful fintech companies are now rebundling. Robinhood added checking accounts and credit cards. Cash App offers everything from stock trading to tax filing. Stripe is becoming a full-stack financial services platform for businesses.
This suggests the end state isn’t “fintech replaces banks” but rather “fintech and banks converge.” The winners will be whoever best combines the technology expertise of fintech with the regulatory infrastructure and trust of traditional banking.
Implications for Students and Job Seekers
For CS and economics students, fintech represents one of the most interesting intersections of both fields. The technical challenges are real—building systems that handle money requires reliability, security, and precision that most software doesn’t demand. And the economic questions are fascinating—how do you price risk when you have more data than traditional lenders? How do payment network effects work? What happens to monetary policy when fintech blurs the line between deposits and other financial products?
Whether you end up at a startup, a big tech company’s fintech arm, or a traditional bank trying to modernize, understanding both the technology and the economics will be increasingly valuable.