The Sinking FinTech Industry
Disclaimer: Do not misinterpret the title. Fin-Tech is a booming industry. An Irish-American payment service "Stripe", recently raised more than USD 600 million, making it one of the most valuable startups of 2021. MarginValue, another Indian fin-tech startup is doing rounds after creating greater significance in terms of how people are learning to invest in rural India. In China (the largest FinTech market in the world), more than USD 32 trillion was transacted using modern financial technology services. The paradox is not too far. Chinese authorities are already feeling very uncomfortable with the increasing rate of fraud and losses prompted via these tools.
Fin-tech is a booming yet sinking industry that is yet to reflect hazard in other developed and developing nations. China is a front-runner, a country that can be successfully termed cash-less. The Chinese government is facing lack of human resources to inspect more than 50,000 companies operating financial services via technology. The case is worse in modern cities like Beijing and Shanghai; there is absolutely no prudence over the transaction safety in a market that does not completely understand the insecurities of using such services. An esteemed personnel from China's Central Bank noted in 2020 as how there is an immense lack of philosophy in dealing with Fin-tech led fraudulence. The balance is missing; evidently while p2p (peer to peer lending in 2016) services were restricted over market nuisance, the industry collapsed, loans quadrupled and firms disappeared. Chinese authorities are wary of the past, yet the crackdown is imminent. It is invaluably essential. Markets other than China are overly cautious but Fin-tech is already going to hurt many investors.
The Spillover
As the climate is warming up in China, restrictions on fin-tech is going to lead into an industrial spillover to other internet led transactions. India and the US are both lurking towards a more significant fin-tech based operations. The problem is primary; markets have become an indispensable part of newer technologies and nobody really knows how the nature of backlash should and can be anticipated. Also, newer regulations like in China will force companies like Stripe to ensure that transaction can only take place with increasing jurisdiction. Essentially, making fin-tech companies lenders, not facilitators.
Such a proposition will be devastating for smaller businesses and new entrepreneurs. Not only will "capital-size" decrease with trade volumes, micro-loans will be understandably unaffordable. If smaller businesses cannot utilize the blessing of a flexible platform like financial technologies; larger lending bodies will come into the picture all over again-resulting in limited opportunities, delayed operations and diminishing scope of business activity. Generally, international markets are showing signs of welcoming such industries; yet there are established issues like P2P lending, also in the context of post-Covid world, where lending is expected to rise amidst subsiding rate of employment (in terms of firms shifting into virtual operations). Stripe has struck at the right time. It will need the capital to re-structure services against other predecessors.
SDSS Global is a strategic consulting company based in Melbourne-working with businesses and individuals across the world to identify issues via research and implementing solutions with customized methodologies.