Fitch Warns: Fintech Growth Is Disrupting Traditional Securities Firms

According to a new report from Fitch Ratings, the rapid expansion of financial technology is placing mounting pressure on traditional securities firms’ business models, particularly as global regulations evolve to encourage innovation.

Fitch noted that as electronic trading matures and commissions continue to shrink, domestic flow-based brokers are steadily losing ground to digital platforms offering cross-border access, multi-asset trading, and extended hours.

The report said this shift will likely intensify amid ongoing product innovation and the growing demand for diversified asset allocation across markets.

“Technology-driven internet brokers and digital financial platforms, with broader product ranges and access to global markets, are better positioned to capture the evolving preferences of modern investors,” Fitch wrote.

At the same time, securities dealers connected to banks may benefit from these changes, as banks—backed by larger budgets and digital infrastructure—expand deeper into the digital asset ecosystem.

Conversely, firms that remain focused on domestic markets and commoditized products will face greater challenges as fintech competition accelerates.

The pace and impact of this transformation, Fitch emphasized, will depend heavily on regulatory advancements and improvements in market infrastructure.

Fitch expects more regulatory clarity in major markets, which could “open the door to digital assets and broaden the universe of investable instruments.”

The agency said harmonized standards for asset classification, licensing, custody, segregation, reserve management, and disclosure will likely speed up adoption of tokenized real-world assets and programmable securities.

These developments, Fitch predicted, should boost revenue and income diversification for securities firms, though potentially at the cost of certain legacy businesses.

To thrive in this environment, continuous investment and balance sheet agility will be crucial amid the rise of AI and product innovation. Strong capitalization and liquidity are essential to finance infrastructure growth, manage risk exposure, and close distribution gaps.

Fitch also highlighted the importance of developing advanced risk management tools to monitor exposures, reduce volatility, and address regulatory risks — alongside strengthening cybersecurity capabilities as operational complexity increases.