Fintech as Simple as it gets

For the last 5 years I Heard this term lot - Fintech - or Fintech industry, with success stories, startups and even banks, and of course a lot of failures and disasters. So what is Fintech and why all this aura of importance, news and coverage is drawn into it. 

So some definitions of Fintech would say it is Technology used to support or enable banking and financial services - and that is Oxford definition. So it’s just the automation of banking and financial services. Or is it much more!

Another definition will say: Financial technology (Fintech) is used to describe new tech that seeks to improve and automate the delivery and use of financial services.

Broadly, fintech describes any company using the internet, mobile devices, software technology or cloud services to perform or connect with financial services. Many fintech products are designed to connect consumers' finances with technology for ease of use, although the term is also applied to business-to-business (B2B) technologies as well. 

When fintech emerged in the 21st Century, the term was initially applied to the technology employed at the back-end systems of established financial institutions. Since then, there has been a shift to more consumer-oriented services and therefore a more consumer-oriented definition. Fintech now includes different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management to name a few.

“Banking has to work when and where you need it. The best advice and the best service in financial services happens in real-time and is based on customer behavior, using principles of Big Data, mobility and gamification.” - Brett King

Fintech now describes a variety of financial activities, such as money transfers, depositing a check with your smartphone, bypassing a bank branch to apply for credit, raising money for a business startup, or managing your investments, generally without the assistance of a person.

So how the Fintech will help the world, Let’s take a look at the simplest one here and it is 

• Instant payments: making payments in just seconds (less than 10 seconds). So that is simply why it is very important and crucial for both Finacnial services entities and banks.
• Digital banking: give me one name of anyone you know likes to go to the bank?!! Here comes the Fintech solutions digitizing the whole banking processes and experience, i guess they will add lines just to keep the UX as expected.
• QR payments: paying your merchants with a QR scan. I kinda like this one -but the risk is high I guess.
• Social media pay: here we are talking about social media apps payments like facebook pay, whatsapp for busines - will get payment soon -, instagram and others. This is the new market - not new to be fair - and integrating the paying services within these markets is so essential to improve the whole experince of shopping and yes the shopping trends is shifting and will change to be almost completely online.

“If banks can’t offer something more valuable than Amazon Prime, then we’re probably in the wrong business.” – Ramy Nassar

• Contactless cards - obviously important one especially after the COVID-19 pandemic and the social distancing. 
• Blockchain: I will talk about this one in a seperate article, but for now I want to tell you about the big players (VISA, ripple, IBM), and yes Blockchain is here to stay. No one can deny the stability of the Blockchain network, and that is why the financial services are going or accepting that market shift so quikly.

The big winners here are the platform providers and money transfer operators along with the users of course. 

“We’re witnessing the creative destruction of financial services, rearranging itself around the consumer. Who does this in the most relevant, exciting way using data and digital, wins!” – Arvind Sankaran

When it comes to businesses, before the advent and adoption of fintech, a business owner or startup would have gone to a bank to secure financing or startup capital. If they intended to accept credit card payments they would have to establish a relationship with a credit provider and even install infrastructure, such as a landline-connected card reader. Now, with mobile technology, those hurdles are a thing of the past.

“A large majority of customers feel FinTechs are providing a good experience (80 percent). Only 40 percent of bankers believe the same.” i-Scoop

So what I mentioned was the direct impacted areas and functions of the system, but you have to know what levels and services will be impacted or benifited from these Fintech improvements.

I will list some markets in which I see - or already - big opportunities of the Fintech improvements according to the work done and services been provided by the Fintech companies 

1. Retail Banks (High number of customers being served, Four or five figures customer value, High level of customer concentration) 
2. Wealth 
3. SMEs
4. Mid corp
5. Global companies 
6. Instititions 
7. Banks 
8. Countries (Low number of customers, Several figures customer value, Low level of customer concentration) 

So Banking as a service is delivering Cheaper, Faster, Better financial services, and Fintech is here to do just that.

“Banks have to upgrade themselves, or risk being burnt to the ground.” – JP Nicols

And there is another question I asked myself, where all that is happening, what markets? as this trend will change a lot, you should see wher is the heat coming from and where will hit first in order to benefit from it or even better to be a part of the change.

So the markets are 

1. UK (Big existing market)
2. USA (Second beggist market and emering/expanding fast)
3. Asia (East south Asia) - They will get there as they always do 
4. Latin america (Attractive market with big market for expansion) 
5. Then the rest of the world 

North America produces most of the fintech startups, with Asia a relatively close second. Global fintech funding hit a new high in the first quarter of 2018 led by a significant uptick in deals in North America. Asia, which could surpass the United States in fintech deals, also saw a spike in activity.

Another example for the mobile-only stock trading app like Robinhood charges no fees for trades, and peer-to-peer lending sites like Prosper Marketplace, Lending Club and OnDeck promise to reduce rates by opening up competition for loans to broad market forces. Business loan providers such as Kabbage, Lendio, Accion and Funding Circle (among others) offer startup and established businesses easy, fast platforms to secure working capital. Oscar, an online insurance startup, received $165 million in funding in March 2018.

“81 percent of FinTechs offer faster services in the perception of customers. Illustrating the underestimations of bankers: only 36 percent of bankers feel the same.” i-Scoop

So what are some trends of the digital banking transformation:

Blockchain Data Management

1. Mobile only banking 
2. Ai driven security 
3. Chatbot client serviceing 
4. No card trasnactions 
5. Biometrics identification 
6. Streamlined client billing 
7. Voice assessted banking 
8. Big data 
9. Robotic process automation 

Fintech companies are getting a lot of attention, but they’re not about to replace Wall Street’s stalwarts. PayPal, a fintech granddaddy, only joined the ranks of global financial powerhouses in early 2018, 20 years after its founding, when it cracked $100 billion in stock-market value. 

FinTech has expanded in scope, now covering the full spectrum of finance and financial services. It can be delineated into five key areas: finance and investment, internal operations and risk management, payments and infrastructure, data security and monetization, and consumer interfaces.

A common image of FinTech is that of alternative financing mechanisms, such as P2P lending (facilitated by a platform). But FinTech also encompasses the integration of technology in such financial transactions as crowdfunding and algorithmic trading. And FinTech plays a large role in institutions’ internal operations, as evidenced by the high levels of spending that large financial institutions invest in enhancing their IT capabilities. 

Whether purchasing coffee at your local coffee shop or managing your finances, fintech is all around us in 2020.

Some U.S. states and consumer advocates are wary of letting fintech companies apply for federal banking charters, arguing that the states that currently oversee them are better at balancing innovation with consumer protection. In the next article I will talk about some regulations for Fintechs.