What GameStop says about tech disruption

What GameStop says about tech disruption

If the frenzy around GameStop has taught us anything, it’s that new tech can cause significant disruption for established players. A comparable storm is brewing in fintech – can the legacy vendors adapt in time?

Jamie Nascimento
February 18, 2021
min read

It’s not every day that one stock's movement on the US market makes the news across the world, but GameStop is different.

Change often feels disruptive, as it is new, unexpected, almost unbelievable.

Where the markets were only previously accessible to professional investment services, moving scale investments, technology has levelled the playing field. Robinhood opened up access to the markets, while Reddit enabled mass communication. The key here is that technology created change. Whatever your thoughts about the events around Gamestop, technology changed the access and is unlikely to be removed.

We're seeing a similar pattern in the role of technology across the wider capital markets. Previously, industry-specific, empowering and enabling technologies were only accessible to the bigger, established players with the resources to manage these legacy systems - they required constant management, expensive upgrades and expertise to make the most of the complex processes.

Over the last few years, changes in what technology is capable of have kickstarted a revolution in tech enablement. This is positive news. Everyone should have access to the right technology and be able to scale against your needs.

Technology creates competition

Legacy software providers have been able to dominate the market because of a lack of competition in the industry. Customers, who didn’t have choices, find themselves faced with a ‘take it or leave it’ situation. They believe they have no choice but to go with the big players and pay what they’re asking. The scale customers were also the only ones that had the resources to invest in technology that, at the time, was expensive and time-consuming to create.

For too long, a lack of technological options has hamstrung financial services companies that want to offer more to their customers. Existing providers tie them into long contracts, for solutions which often overpromise and underdeliver. They don’t innovate their products because without competition, there’s no incentive to drive innovation. They don’t need to focus on their client’s needs because there’s nowhere else for clients to go.  

This leads to inefficiencies for these financial services companies. They can’t move fast enough to provide their customers with what they need, because their software solutions aren’t good enough to support their ideas.

However, thanks to technology, the tide is turning.

The shake-up is coming

Previously, the barriers to entry were too high and the giants were too entrenched in the market for small companies to be able to achieve. Thanks to technological advancements such as cloud-based applications and low code development environments, new entrants into the software industry have been able to create innovative new solutions that provide tangible value for their customers.

New entrants are entering the fintech software industry with more powerful technology and better business practices than the established players. It’s the new startups and scaleups that are pushing the boundaries of what can be done. For example, at LemonEdge, our Canvas staging feature brings you unrivalled scenario modelling, so you can evaluate the impact of any decision you make without it affecting your central system.

It’s the new industry entrants that seek to build trust with their customers before they sell to them, abandoning opaque pricing models and opening up their software for use prior to signing. Customers can decide if the software is right for them before they buy.

All of this means that financial services companies can move faster and match their customers’ needs without involving themselves with the established players. Customers have begun to realise that they can get a better product, with better service, from newer, more bespoke providers. Legacy providers now find themselves in a situation where they have to adapt and become more like startups, rather than the other way around.

Positive news for companies and their customers

Technology drives everyone to improve. The recent example of technology democratising stock market investment has shown that established investors can’t take their eye off the ball, new technology is forcing legacy fintech software providers to up their game. We welcome these developments because, at the end of the day, it’s our customers that gain the most benefit.