FinTech Rising

Introduction

FinTech refers to IT integration within financial services through Internet to lower barriers both to entry and costs within the industry and also empowering individuals and organisations through improved allocation of human and capital resources from currencies and financing, through payments, fund transfers, operations, risk management and data analytics.

Factors accelerating FinTech

The combination of high smartphone penetration rate, injection of FinTech investment funding, strong public sector backing for legal regulations supporting FinTech initiatives has facilitated mass adoption of Internet Finance. This had led to the growth of supporting applications and infrastructure in finance from Peer to Peer (P2P) lending and alternative banking, to crowdfunding and selection of financial and investment products through robo-advisors etc.

The emergence of FinTech could be attributed to the two factors below:

1. A realisation of the value of how much IT can contribute to creating alternatives to many traditional ways in which financial services are provided. Established and new providers of financial services are increasingly looking to differentiate from competitors and innovating new and more efficient ways of offering services and products to improve customer satisfaction and cost efficiency

2. A growing appreciation among consumers of just how much recent technological advantages have opened up space for alternative services offering cheaper, more accessible ways of managing their money, greater access to loans or credit, and better returns on their savings or other assets

In China, Alibaba has built a money market business from nothing to 90 billion of assets within one year of its launch in mid-2013. At one point in 2014, it became the world’s fourth biggest money market fund. It has accelerated the growth even further through Alipay and its strategic partnership with banking institutions in China. Tencent which is well known for WeChat messaging app has also launched China’s first online only bank, WeBank. Xiaomi has also began public beta testing of an online money market fund that lets users earn interest on money saved in Xiaomi’s wallet app.

However, FinTech is not just limited to big corporate companies. Smaller enterprises and startups could also create enormous value of their financial services by embracing technology as a way of connecting with customers to create a consistent user experience and providing high degrees of convenience accessing new products and services delivered in a convergent way. This is possible through cloud computing and Internet commerce to expand and scale products and services to a global market rapidly.

Future of FinTech

Regulation is forcing banks to change their business and operating models. FinTech has the potential to drive similar changes in the future as banks are disintermediated or are no longer competitive in certain areas. Startups are catching up quickly in deploying innovative technologies to establish a vibrant peer to peer lending system, equity crowd funding and also other niche areas like crypto-currencies, improved data analytics and more sophisticated wealth management tools will help people manage their money.

However, the one challenge FinTech startups will face from my observation is that they will need to clearly understand financial regulations in order to build technologies that are legally complying and also at the same time pushing boundaries to open up new markets. Over time, I believe that the three key stakeholders such as the private and public enterprises must collaborate closely together in order to broaden technology reach, increasing overall competitiveness and foster innovation to ensure a better customer experience and design.

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