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FinTech – Finance meets technology, just getting started!

Rekha Ramaswamy
, 11 Jul 2016
Rekha Ramaswamy

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11-Jul-2016

What Is FinTech?

FinTech – Finance meets technology – using technology to disrupt financial systems. There are many sectors of banking being disrupted by Fintech including wealth management, lending, digital identity, and lifestyle banking.

It would not be unfair to say that Fintech is doing to the Financial Services Industry what Uber has done to the personal transport industry – shift the focus from owning the asset to managing the asset using technology. The emphasis of Fintech is on managing money than on money itself.

Why FinTech? The need for FinTech?

FinTechs are technology companies at heart. They looks ways to use technology to manage assets.

The rise of FinTech is being termed as the Fourth Industrial Revolution; and this has happened in the last five years primarily as a result of the following key developments:

  • The financial crisis of 2008 created a seismic shift in the dynamics of trust in banks and other financial services organizations. Fintech came in a like a breath of fresh air. Fintech would have happened without the crisis too, but it would have taken much longer
  • Fast Changing Technology Space: Our experience in everything from communication to music to money matters is now bettered by technology – faster, cheaper and more convenient
  • Rise of the millennials: Millennials or individuals reaching adulthood at the turn of the century (2000) have completely redefined the way we live. Their expectations are very different and command the largest wallet power
  • Upsurge in the use of mobile internet: With a smartphone these days, we have a supercomputer in our pocket and are always connected

The advances in technology have led to a transformation in the individual to bank relationship – from the brick and mortar days to a more digital/tech-savvy present. People are moving away from the conventional ways of dealing with money.

Let me the take the classic example of China where home born internet giants like Alibaba and Baidu have now forayed into financial services and have gained a considerable market share in third-party payments. These new entrants were faster than the banks to offer convenient, reliable, fast and cost-efficient alternatives to traditional bank payments and are steadily pulling payments away from the clutches of banks.

What advantages do FinTechs bring?

Tim Berners-Lee, the inventor of the Internet, estimated that in 10 years everyone in the world will have full access to the internet anywhere. That’s what it’ll take to enable a digital currency economy.

Open source software and cloud technology have lowered the barriers to entry for technology start-ups, paving the way for small innovative companies to make an impact. They do not have legacy IT systems or labour intensive business processes.

Start-ups have the advantage of being small, hence they can build quicker, focus on solving smaller problems and not dealing with bureaucratic hurdles.

 Outcome(s) of Fintech:

  • Democratisation of finance: The current model of banking where the costs of systems and profits of the banks is accrued by overcharging the end customers. This hits the end users really hard and keeps the services away from those who cannot afford it. As FinTechs drive change, financial opportunity will reach many more people putting an end to exclusivity. Charges will be proportional to the services and the savings made will yield better returns for the people.
  • Travel is an important driver and indicator of economic growth. Fintech can make travelling safer in unimaginable ways. A major challenge that one faces when travelling to a new land is money – New currency, risk of carrying cash, availability of payment infrastructure etc. This is where Fintechs change the travel scene completely. With their solutions in place, no cash ever changes hands.
  • FinTechs are transforming global supply chains by acting as intermediaries in facilitating transactions between a company and its suppliers. Traditionally, supply chain management has been about sourcing, making, and delivering. Now, it’s about using the supply chain as a source of inexpensive capital. Fintechs enable both the parties to extend its payables and at the same time accelerate their payments. Many multinational companies are using this approach to improve their working capital, get access to greater liquidity and become more consistent in timing the payments.
  • FinTechs can act as gateway to development.

Picture Africa, the least developed continent on Earth. Telcos played a major role in payments in Africa – most famous being Safaricom’s M-Pesa in Kenya. However, with newer technologies like block chain which is based on trust less method of operating, third parties like banks acting as brokers will become a thing of the past.

Technologies such as these will leapfrog a lot of the financial infrastructure that exists today. A digital economy based on technology could hold the political leaders there to a new level of accountability. It will significantly reduce corruption from government and provide transparency and control to every day citizens. It will dramatically cut costs on financial services like remittances, credit cards and money transfers, thereby opening them up to those who can’t currently afford them (read most Africans). On a continent with 54 countries, having a seamless payment system will make cross-border trade infinitely easier.

Challenges:

No new change comes without its share of challenges.

  • Big banks have the advantage of scale
  • Fintechs need to comply with complex regulations and navigate through political power constellations that vary from country to country
  • Technology to deal with money requires bank-grade security
  • FinTech talent is highly specialized and expensive. 

Future:

If you cannot beat them, join them.

Many traditional business models are exploring partnership options with Fintech companies. From Square to tech giants like Amazon and Google, a range of players are entering the financial sector to help consumers manage payments and their day-to-day finances.

Open source drives innovation and FinTech thrives on it. Now, imagine what would happen if the two meet. With the marriage of open source and FinTech, we are looking at a horde of opportunities opening of for open source solution providers like Ashnik. Add the fact that we are strategically placed in the financial capital of Asia. FinTech is only getting started…

Rekha Ramaswamy | Business Development Executive at Ashnik


 Rekha is Business Development Executive at Ashnik Singapore. Her responsibilities include lead management, new lead development, sales pipeline management – engagement to closure and prospect engagement in SEA. A driven and progressive sales professional, Rekhabrings in account management and market research experience to the table. She has diverse set of experience of over 4 years in Technology,Insurance, Professional Services and now Enterprise Sales. She has helped on-board clientele from the Consumer Goods, Health Care, Consultancies and Power industries. She has worked in multiple geographies including India, Singapore and the US.


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