Wall Street Vs. Silicon Valley

By Galen Stops

Galen Stops of Profit & Loss observes financial technology startups of Silicon Valley challenging the rule of established banks of Wall Street in both retail and investment banking. Alexei Miller, head of Financial Services Practice at DataArt, takes the edge off the potential toll on the banks by highlighting some of the barriers that "fintech" startups are facing and some of the more peaceful forms that convergence of traditional banking with it’s tech-savvy alternatives may take.

“Silicon Valley is coming,” JP Morgan CEO, Jamie Dimon, rather portentously warned in a letter to shareholders in April. He went on to explain that there are currently hundreds of startups out on the West Coast with lots of intellectual and economic capital that are working on providing alternatives to traditional banking services. The Goldman Sachs report projects that as much as $11 billion in annual profit could leave the banking system as a result of this trend.

Meanwhile, the economic muscle behind these firms is only growing, with data showing that global investment in FinTech ventures tripled in 2014 to reach $12.21 billion.”

However, Alexei Miller, managing director and partner at DataArt, warns that banks won’t be throwing in the towel just yet. “I think that there’s huge potential for these FinTech firms, but I think that some of my fellow commentators on this subject are maybe a bit too enthusiastic about their changes for success. There’s a lot of institutional knowledge on Wall Street about how financial services power the economy that a lot of the upstarts do not have,” he says.

“It’s funny though, because on the one hand you have banks acquiring those start-ups and on the other hand you see both the traditional banks and asset managers that have invested a lot in their in- house technology, now spinning those off as independent businesses,” notes Miller.

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