Is Fintech Constructive Disruption?

Have you ever heard of ‘Fintech’? Let me approximate the meaning. Fintech is short form for ‘financial technology’ which is a term used to denote any kind of technology applied in financial services. Naturally, this question cannot be put forward in countries like China, USA, Britain and similar countries of the world since these are pioneers of the financial future, nor am I flexing my informatory muscles in this article notwithstanding the fact that I spent days on end perusing information and data related to Fintech. Although this information and data abound on the internet, they do not offer satisfactory abridgements like the ones I was able to wrest from knowledgeable parties who are well-versed and adept at the Fintech science.

Fintech is not merely a digital financial application to improve the accessible financial services. It is rather a technology in its own right that applies numerous tools including artificial intelligence (AI), the internet and big data to offer all items associated with the world of finance in a new template. So, what is the purport of the above?  Does it mean that there is no longer any need for banks? Or does it signify innovation of new methods of lending, considering that lending is a basic banking service? Is it a figment of the imagination or senseless exaggeration? What is going on around the globe? These questions do not have definite answers. It is high time for proposing them in the hope that they would help us to fully comprehend the above.

According to a study conducted by KPMG, investments in Fintech reached USD 60 billion in 2015, the year that witnessed a boom in investments of this type. In 2016, VC (Venture Capitalist) investment in Fintech was tantamount to USD 13 billion. China meanwhile lost nigh USD 30 billion of the total credit card income. This is considered a potent forecaster of the fate of conventional banking services. This figure in the Chinese economy is corresponded by USD 235 billion in financial transactions via the famous application, Wechat, where China has outmatched the United States for the first time. The most recent Fintech analysis report issued by KPMG indicates that in the first half of 2018 alone, Fintech volume had scaled up to USD 60 billion. The shares in that volume are broken down into USD 14 billion for the United States, USD 26 billion for European countries and USD 16 billion for Asian countries.  What do these figures signify? How do countries deal with an uncertain future?

The vital question is: why should we, as users of banking services, know and enhance our awareness about Fintech? The utmost feat that Fintech can actualize is financial inclusion, which means that everyone has access to financial services. In short, this means breaking the banking monopoly regarding the provision of financial services which entails destabilization of these banks and waning their control on the global financial system.

I have disclosed all this information, dear reader, to impress upon you the fact that we are living on the threshold of a totally new era. But does that mean that there are still individuals in the world who do not have access to banking services? The regrettable answer to this question is: yes, there are still those who are called the ‘unbanked’ for different reasons, including populations that are geographical secluded from towns and the awareness level of those populations. What matters here is that the cost of accommodating these populations in the banking systems would be higher than the desired benefit for the banking sector though all these will be redressed by the financial Fintech.

When this financial inclusion or incorporation takes place, a new scene of services and supply & demand will dawn on the world economy to break all forms of monopoly barriers. That will not be the end of the matter because financial services do not denote deposit and withdrawal, since they include lending, too.  Fintech will introduce new forms of lending that combine both the financed and the financiers. A single push on a button can present knowledge on credit capacity and the data records of applicants. This form of lending is known under several nomenclatures that are facts on the ground and not figments of the imagination, such as the ‘peer-to-peer’ and the ‘crowd funding’ types. Fintech will spearhead the participatory economy to render it a new reality that is different from the monopoly of services that we are currently witnessing.

We are apprehensive of the Fourth Industrial Revolution under the misconception that it would deprive us of our jobs. But the truth of the matter is that this Revolution represents readiness and capacity for change that hinge upon our flexibility as well as the flexibility of the official and private systems to adopt novel and indispensible developments. Who can stand the onslaught of this flood?  Will it be wise to ignore it or bide our time passively in anticipation of developments?

Fintech is a disruptive technology in the sense that it demolishes all the old mansions in order to build new ones whose landmarks are slowly taking shape. Credit and debit cards will become relics of the past like video and tape cassettes. Some states and entrepreneurs have decided to become part of the show rather than passive observers. How have these states dealt with the onslaught of this flood?  What can we learn from this?

(To be followed……)