The Silicon Valley formula of innovative ideas, new technology, and multi-billion dollar investment that has disrupted many industries is now changing the financial services sector. Last year, venture capital gave $12 billion to new financial tech startups, three times the amount invested in 2013. The targets of these startups cover the whole range of financial services: from crowdfunding to peer-to-peer lending, from wealth management to payments. The prize they’re after is industry revenue estimated by Goldman Sachs to be $4.7 trillion.

So-called “fintech” innovators aim to reshape finance in three ways. First, by cutting costs: Lending Club’s expenses are one-third those of a conventional lender, and TransferWise charges much lower fees than banks to send money across borders. Secondly, by introducing new ways of assessing risk based on data: Kabbage and OnDeck collect massive amounts of information, and Kickstarter uses crowd wisdom to finance startups. And thirdly, by creating a more diverse and therefore, more stable credit landscape.

Fintech lenders like Lending Club, Prosper, and Zopa match a wide range of borrowers and savers. While still small, these financial tech firms are dreaming big.

I’m John Howell for 3BL Media.

Video source: Investors Fund New Tech Revolution in Financial Services