Change is coming to the financial sector. For a long time, the industry believed that tech startups couldn't challenge traditional financial institutions. The incumbents were too big and the industry too regulated.

But the last two years has seen a major shift in attitudes, as financial institutions have been forced to respond to the success of their new tech competitors.

Goldman Goes Digital

Last year, for example, Goldman Sachs unveiled GS Select, a new digital lending service that extends the capabilities normally reserved for its Private Wealth Management (PWM) clients to non-PWM, non-GS clients. Independent advisors can now tap GS assets through GS Select, and they can borrow up to $25 million dollars to on-lend to their clients. While GS Select is not a true lending platform - yet, anyway - it represents a big shift for Goldman.

Conventional wisdom would have had it that corporations are better off running small competitors out of the market. Large institutions like Goldman Sachs could crush or acquire the competition due to their size, reputation, expertise and excess capital.

But today, you're seeing the big players like Goldman embracing platform innovation out of necessity, as peer-to-peer lending platforms such as Prosper and Lending Club have crowded the personal lending market. Just those two platforms alone accounted for $26 billion in loan issuances by the end of 2016. Goldman Sachs's loans receivable that same year stood at $49.7 billion.

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Payments, Quants and Alternative Investments

Investment banks aren't the only ones feeling the pressure. The growth of payments platforms like PayPal and Venmo has retail banks worried too. Similarly, money transfer startups like TransferWise have challenged the traditional cross-border payments model supported by banks and service providers like Western Union.

In response, 30+ banks  , including Bank of America, Wells Fargo, JPMorgan Chase, and Capital One, banded together to launch Zelle in September 2017. Zelle, meant to be the banks' Venmo competitor, enables peer-to-peer payments direct from your bank account. It's joint-ownership structure is reminiscent of the early days of card networks Visa and Mastecard, which started as bank-owned cooperatives that were launched in response to the growing threat of closed-loop credit card networks like American Express.

The hedge fund industry is also facing change. It's hefty 2-and-20 fee structure has attracted startups like  Quantopian, which has raised equity capital from Andreesen Horowitz and an investment fund from Steven Cohen. Quantopian is a platform for quants, in essence creating a crowd-sourced hedge fund. It gives away tools and data for free to enable anyone to create their own quantitative investment strategies. The best performing strategies get put to use and the creators get paid. Several other startups, like Numerai and QuantConnect, are taking a similar approach.

Finally, platforms have had a big impact in the alternative investments space, with startups like AngelList. AngelList matches tech startups looking to raise equity capital with investors. It has also launched an innovative syndicate model, which enables individual investors to pool together and back mini-funds that will then lead investments into startups on AngelList. These syndicates help individual investors by taking ownership of the due diligence as well as sourcing new deals that these investors would otherwise not be able to access.

Finance for All

Across the board, platform startups have created a big shift in finance. An industry that was once aimed largely at servicing the wealthy few has been opened up to a much wider group of both consumers and service providers. These platforms are democratizing access to financial products for investors, as well as lowering barriers to entry for everyone from sophisticated quants to small-to-midsize lenders.

However, the landscape of startups that exists today is just the beginning. Most of these companies have focused on the low-hanging fruit of those who already had access to traditional financial institutions but who were underserviced by the status quo. As these platforms grow, they will start to open up even more to the unbanked and those who lack access to traditional credit today.

For financial institutions who believe they have shown that they can compete with the latest wave of tech startups, they shouldn't get to comfortable. The initial traction these startups have shown has attracted the attention of the big tech monopolies like Amazon, Google and Facebook, while those who have already had major success abroad like Alibaba and Alipay are eagerly expanding to new markets. And that's to say nothing of the potential of blockchain, which is still likely years away from having a big impact in finance.

Traditional financial institutions have gotten used to big profit margins and big fees, but as Amazon's Jeff Bezos likes to say: your margin is my opportunity. While the platforms shown above have already had a big impact on the financial sector, the change is only just beginning.