From various survey’s of financial professionals, it’s clear there are different interpretations of why FinTech is so important. So, we have put together a list of reasons behind this:
The payment segment within FinTech is a major enabler of economic growth. Since its emmergence FinTech has disrupted and reshaped the global financial landscape. Electric payments added $296 Bn to GDP in the 70 countries studied between 2011 and 2015. Which is equivalent to the creation of ~ 2.6 Mn jobs on average per year over the five year period, or ~0.4% of total employment. Each 1% increase in usage of electronic payments produces, on average, an annual increase of ~$104 Bn in the consumption of goods and services.
Fintech has brought a new paradigm to the design and implementation of strategies for financial inclusion. This has opened up opportunities for previously “invisible” groups of population/financially excluded businesses with alternative approaches to the assessment of creditworthiness. For example, the use of a smartphone for mobile banking or investing services has lifted people from poverty with technology and democratize the financial services industry by boosting institutional efficiency.
The Speed and Quality Of Innovation
Through competition and superior solutions, FinTech drives improvements in traditional financial services and promotes the replacement of pen and paper-based systems with innovative new solutions, which can improve customer experience and benefit other sectors of the economy.
Business Sustainability And Scalability
FinTech comprises the foundation of MSMB/SMB sustainability with new tools and solutions that improve cash flow, Supply chain management, and logistics. Electronic invoicing, open API’s, HP solutions, etc. enable businesses to easily expand capabilities, operate at higher efficiency and a manageable scale.
Market Curation and Structural Transformation
Fin-Tech-bordering technologies such as AI, RegTech, EdTech, HealthTech etc. transform market structure by replacing age-old systems and traditional business models with advanced solutions and more optimized models of business operation.
New Value Streams
The transparent and real-time operation of FinTech innovations, such as block-chain and digital currencies, are generating new value streams – not just in financial services but across the whole economy. Following the opportunities, financial institutions have already started to launch their own currencies/labs/projects to explore new revenue streams.
Transparency and Audibility
More digitized transactions support greater audit capability, accountability in payments systems and security by reducing risks, which leads to a reduced need for regulation. In addition, digitized solutions provide data for regularity authorities to drive meaningful insights into the results of regularity policies and make beneficial adjustments to regulatory strategies.
FinTech overcomes international and cross-industry barriers to facilitate collaborative culture. FinTech also catalyzes the growth of the supportive ecosystem – dedicated incubators, accelerators, venture funds, regulatory sandboxes, etc. The industry serves as a glue for the market participants to recognize the necessity in mutually beneficial collaboration for a larger good. FinTech created and facilitates the concept of open innovation.
Since technological innovations are quickly adaptable, FinTech erased/reduced national barriers for entry, fostering competition in international markets. A multitude of international FinTech hubs combined with startup supporting programs and regulatory sandboxes have expanded the market size for a given startup in particular country.
The Scale of The Industry
Investments in FinTech have grown exponentially in the past decade – rising from $1.8 Bn in 2010 to $19 Bn in 2015. FinTech startups have attracted $1.8 Bn worldwide in the first nine months of 2016. Moreover, some estimates suggest that ~$4.7 Tn out of $13.7 Tn of the traditional financial services revenue is at risk of being displaced by new technology-enabled entrants. FinTech has grown from a niche to an industry that has an impact on policies and institutional development strategies.
Darrent is a digital marketer, tech enthusiast & blogger.