The FinTech Revolution
“ India has the highest fintech adoption rate and second-largest fintech start-up based in the world. 1000+ fintech start-ups in India spread across diverse areas such as digital lending, digital payments and wealth management are offering impressive emerging tech-based solutions”~Achyuta Ghosh, Head – Research, NASSCOM
Let us start with a simple question,
How many of you like to travel overseas? You go to the airport with money in your pockets to convert them to dollars, pounds, etc., so you go to an exchange bureau, and you feel like crying on the rates you get.
Let’s say you are paying 5% transaction cost on a trip abroad which means for every 20 trips you could have got one trip free if there were no charges.
You take a trip to the US; you spend money. You have Revolut Card (A FinTech start-up) where your money is converted at good rates when you get Dollars, and you are happy because of that 5% saving.
Today is the world of APIs (Application Program Interface). API is complicated, but imagine you are on google maps, trying to reach a destination. Google says you can take the Uber, Ola, bus, metro train with different charges for each. How did this happen? It is by using API’s- A system talking to a system. This what is being done by FinTech.
So, what is FinTech? It is financial services combined with Technology. Technology is already present; we do online banking, mobile banking, etc. The question here is how is it different. The difference lies in how you think. Companies like Facebook, google started because they wanted to do something different.
3 Things should come to your mind when you think about FinTech.
- Customer Experience and Satisfaction.
- Automation and Leverage.
But the question is, “Why is this FinTech revolution happening now?”
What happened that a gap was created between what the banks were offering and what you as a customer came to expect, especially from a user experience and convenience perspective and that gaps are what FinTech Industry is tackling now. There is a crisis of confidence in the banks and is so palpable that RBI was forced to issue a statement on October 1, reassuring that the “Indian banking system is safe and stable and there is no need to panic”, a rare comment from the banking regulator.
And the gap was so huge that non-traditional banking players decided to jump in and capture the opportunity, mainly tech firms. For example, Amazon experimented with offering student loan off its platform, Alibaba’s financial arm launched a money market fund that has become the 3rd biggest money market fund in the world dislodging incumbents.
The dynamics are constantly changing and evolving; we have gone from Bricks and Mortar to Digitalization to FinTech. The pace of innovation has increased quite a lot. Today we talk about the 4th Industrial Revolution, The 2nd IT revolution. It’s a world where Artificial Intelligence (AI), Big Data, Internet of Things (IoT), Robo Advisers are scurrying.
We constantly hear a lot of buzz going around AI – which is machine thinking like humans. AI in FinTech is;
- ChatBots –e.g. How much and where exactly did you spend on that US trip.
- Frauds and Threats- Let’s say you have to book an online airplane ticket, you make the payment via your credit card who charge 3% extra, so you have to pay 3% extra on the tops that include credit risk, fraud might happen, but that can be solved using Machine Learning and AI.
- Visual Identification- You call your bank; they ask for your pet’s name. Where you are from, etc., in a world of social media connectivity, these things are easily available, and identity can be forged. Visual identification and fingerprints are something unique and personal to individuals.
Now imagine you are in your office and your boss asks you to find a contract with XYZ supplier; you go on to your machine trying to find the document, you aren’t even sure whether it is the final copy, the clients’ copy, the customers copy or similar.; This can be changed by blockchain- the one source of truth.
Think about your insurance policy; You have insurance for your phone, it gets stolen, what if you get a report from the police that is taken by the system, so if there is a police record for your lost phone then insurance companies pay you, So this is the Smart Contract world.
Others are connecting FinTech to the Internet of Things and wearable technologies, Robo advisory platforms offer consumers an asset management solution that is not only more transparent in what they charge you but also is sustainably cheaper.
“A comfort zone is a beautiful place, but nothing ever grows there” – Unknown.
FinTech does provide quite exciting answers, along with reinventing the Financial sector. We also know that innovation is one thing that betters itself with versions and time. The landscape is changing, and we need to evolve and adapt to this new eco-system. While some might succeed in the evolution and embed this culture of innovation and entrepreneurship across the organization, but many will not and may have to face the consequences.