The Real Future of FinTech: This May Shock & Scare You!

What are we talking about?

FinTech is Financial Technology for short. The term generally refers to that technology which is anticipated or expected to disrupt the systems or corporations to do with finance, as we have known them till now, predominantly, through the course of our more recent history, including banks and assurance companies. Simple enough I am sure, for all of us laymen to understand, and appreciate.

Why are we talking about it?

The main disruptive aspects of FinTech to existing or "traditional" systems or business models are the Peer-to-Peer versions of functions of finance, such as investment or lending. Basically, providing new possible alternatives of Peer-to-Peer nature, to the banks. Again, simple enough.

While the disruptive premise or the functionality of FinTech or the definition of it is simple to explain and comprehend, the thoughts that go on behind the processes and into the coding or building of the technological applications or systems, are complex, sophisticated and highly intelligent to say the least. Well, the same goes for the banking system in general for the last couple of centuries at least isn't it? I mean, building the pyramids in Egypt thousands of years ago was probably far easier to speak off than to execute you can be certain. FinTech, is no different. It is hard stuff. And no wonder, that it is a huge hyped up buzzword or fad in 2016. It should be. And say the press media, that the established financial institutions are afraid of it. Oh, really? Prepare, to be shocked, because the Futurist, this one at least, is going to tell you, the truth.

Let us look at the Banks

The oldest bank in the world, Banca Monte dei Paschi di Siena, has been around since 1472. Berenberg Bank, the second oldest bank in the world, has been around since 1590. Oh yes, both are very much around. And I must admit, most of you may have not heard of them. You have heard of banks like Barclays which has been around since 1690. Citibank has been around since 1812 and UBS has been around since 1854. Basically, banks, can survive for a long time, because they are not easy to disrupt or displace. Much has changed in the world in the last 50 years, or even just the last 10 years alone, but there are banks still, that have been around for centuries, that still have been profitable in times of slumps and recessions, while others like them have nearly shut. In general, the banking industry is well protected, by its very nature, against disruption.

Why banks or the banking industry, is tough to disrupt, is that it deals with the very basic ingredient of economy and commerce; money. Whatever you have heard, learnt or applied about disruption till date, reality is, that disruption has always been happening through human history, but the rules of disruption just work very differently, when it comes to the Banking world specifically.

Advent of iBanking

When the internet came into being, it had nothing to do with the Banking or Finance sector. What has happened today, is instead of a physical interface, people commonly, in the first world at least, interact with banks, for various purposes, through iBanking. The internet became a tool for banks, which evolved by using it.

Now, the Advent of FinTech

Banks, in the business of dealing in and with money, are not composed of decision makers, thinkers, planners, strategists or managers, top or bottom, that are ignorant or incompetent or ill-informed, in general. Most major banks that matter, the names of which you can think of, have heard of FinTech and know about FinTech well beyond what I explain of it herein. In fact, you should not bet against the idea, that they are probably well on top of FinTech, what it is, what it is about, what it can do now and what it can do ahead. The very concept about a Financial Institution you see, is about rolling money today, for it to have greater value, tomorrow. You see the Bank's interest in concepts of tomorrow, or concepts that can shape or change tomorrow here? 

With technology, as it evolves, things or actions not possible before, become possible. Anybody knows that. Easy. So, as Financial Technology evolves, because Technology in general evolves, new ways or methods or processes to do with Finance, become possible. No surprises. No tricks. No gimmicks. No big deal, except what and as you make it out to be (very often, blow it up to be).

So all this fuss about FinTech, the banks have a nicely filtered view of everything practical and realistic about it, most probably. And as they brought in the possibilities of the internet to bring you the Financial Services as you know them today, they will bring in everything behind and about FinTech, past, present and future, to bring you the Financial Services of tomorrow.

So, the Future of FinTech?

FinTech, will be incorporated into the curriculum of subjects to do with Banking and Finance, at universities. It will be part and parcel of how understanding of dealing and working with Finance, within the subject matter of Financial Institutions, will work or will be necessary. 

FinTech will be part and parcel of routine and mundane day-to-day norms of the running and functioning of Banks, that have always been around. FinTech will not give rise necessarily to new banks, so much as, that new banks won't sensibly be able to run without application of what we know today as FinTech, just like the centuries old not sensibly be able to operate ahead. And this will come into being a reality as quickly as the FinTech fad has come to be built up to, up till May of 2016.

FinTech whether as a subject or a field, however you want to define it, will be absorbed or sponged up or co-opted, by the banks that have been around for a long-time, are in existence today and are going to be around for a very long-time. Just as the internet became part of the way banks have come to exist today, all relevant technology summing up FinTech will become part of the way banks will exist tomorrow.

What then of the various tech start-ups that call themselves FinTech companies today? I don't want to answer that question, except that some of them, may be bought up by and absorbed into the structures, of your traditional banks. Some may persist to try to compete as alternatives to banks (which should get increasingly harder because the banks are traditionally organisations with deep resources, who'd never tolerate challenges for too long), without being bought over by them. Or, they will evolve into Consultancies providing Subject Matter Experts on the area, or outsourcing firms servicing existing institutions just as companies like Cognizant do today. Mostly though, FinTech, for all it stands, will be something internalised into every bit of the mundane and routine processes, more than something the bank would outsource or specifically need external support for. Yes, it is a dampener alright. 

And the banks can do this. They are the ones in the business of money, remember? Whether it is to buy and pay for the internal adoption of the systems and processes or to hire the brains or talents, necessary, to work in and incorporate FinTech as part of their norms. This probably already has started, just without the world noticing it as much, as the various efforts of educating the public about FinTech and calls for financing into FinTech companies. It will not be long however, before whatever end-users outside the industry may be subscribing to from the non-Banks, in terms of FinTech, will just be subscribed, from a bank.

Sure, for the mistakes over the past years or even decades, some very big name banks are going to suffer losses, huge ones, in the near future and even go bust possibly, shutting their doors. Not because of technology, including FinTech though. The model of banking itself is like Hinduism. Every time a new religion is born on this planet and it becomes mainstream, it does not challenge the model, concept or existence of Hinduism, its fundamental essence, philosophy and thought process just becomes absorbed or co-opted into the ever evolving oldest school of thought that Hinduism is, with numbers of people subscribing to it merely fluctuating upwards and downwards over time, but its existence never being threatened. Banking, as we have known it for centuries, is probably going to be around, for as long as money exists, even when physical currencies are done away by governments in the future. What food is to the human body, consider the bank, as we have known thus far, to be as much, to money economics. So much for FinTech being a disruptor there then.

What is supposed to be so Shocking & Scary about this?

Whatever it is that is so hyped up as an alternative or a threat to long-standing business models, is likely to end up as something that just passes into an added step in a myriad of processes in how those models continue, with their own evolution, staying relevant, from time to time. Now, that is shocking and scary, in terms of how fast, the world can change, or a game-changer, can itself, change, in terms, of its situation. Cool huh?

Harish Shah is Singapore's first local born Professional Futurist and a Management Strategy Consultant. He runs Stratserv Consultancy. His areas of consulting include Strategic Foresight, Systems Thinking, Scenario Planning and Organisational Future Proofing. To find out more about the Future of Work, Organisations and Commerce, you may contact him for enquiries at [email protected].