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It’s the FinTech Era

Photo: Propeller Consulting

FinTech is becoming increasingly important. People in the developed world are already familiar with its ever growing existence. But in Bangladesh it is still quite obscure as a concept, even though we, too, benefit from it. This is a good time to get more familiar with the term FinTech and its related concepts.

Defining FinTech: What is It all About?

The meaning of the term FinTech is nor terribly complicated to understand. Intuitive thinking is sufficient to provide the right understanding of what it means. In a nutshell, FinTech is simply the merging of technology and financial services to facilitate financial exchanges.  Like FinTech, other terms have emerged because of their relation to modern information technology, for example, Ed tech, Med Tech and even Food Tech. FinTech companies are generally startups founded with the purpose of disrupting the incumbent financial systems and corporations that rely less on software.

Financial Services: It is ‘Traditional’

The financial services sectors have always been considered as an industry which has an entrance with high barriers, strong controls along with devastating rules and regulations. It has earned name as an industry that runs based on the complex electronic payment patterns and links. These actually standardized the ways of formalizing how money moved around organizations. The industry comprises of different companies with various roles such as issuers, acquirers, payment schemes, processors and merchants.

FinTechs & Challenger Banks: PayPal is an Example ‘PayPal’ slashed an industry unprepared for change and they reaped the reward. However, PayPal is not really different from a traditional financial services company because they offered similar digital tools. Their slogan is, “The safer way to pay, receive payments for your goods or services and transfer money to friends and family online”, which is pretty much the mainstream of a financial services company.

FinTechs & Challenger Banks: PayPal is an Example

‘PayPal’ slashed an industry unprepared for change and they reaped the reward. However, PayPal is not really different from a traditional financial services company because they offered similar digital tools. Their slogan is, “The safer way to pay, receive payments for your goods or services and transfer money to friends and family online”, which is pretty much the mainstream of a financial services company.

Mobiles: Another Challenger Bank

Challenger banks are a relatively small retail banks set up with the intention of competing for business with large, long-established national banks. For now there is emergence of many fresher banks that exists only online and not physically. That is to say, these banks exist only in mobiles because today’s youths are comfortable in using their mobile devices in managing their finances more than any other medium.

While answering the question of ‘how fin tech may disrupt the banking industry’, more than 90% of bankers said that fintech firms will have a significant impact on the future landscape of banking, with more than a third believing that fintech will win an equal share (24%) or even dominate the market (20%).

Global Landscape: Connecting the Globe

It’s worth mentioning that the FinTech ecosystems that are most predominant and the capacity to revolutionize in the financial services space varies quite significantly by geography. To be more specific it can be said that a part of the lack of cross boundaries roll-out of many Fin Tech products and services is all about the technology that reinforces the payments and money processing within each country. More movements are going on in case of how you are managing the money to cross the border easily just like it is done within the borders.

The point is the new banks can in fact start afresh from a reputation and technological standpoint. This is because they have been tarnished with financial problems and therefore needs their IT systems repaired newly. They should be looking forward to target the modern customers with an entirely mobile digital banking experience, with greater transparency.

They should also promise to offer digital products that live on your phone, with potential features like real-time balance information, deep-dive spending data, biometric security, open API integrations, no foreign exchange charges, simple money transfers and artificial intelligence layering for more predictive banking. Who’s Doing it Right? Challenger Banks Perspective Challenger banks such as Atom, Tandem, Starling, Mondo, Final, Simple and Monese, have already made an impression and their success is worth noting. Some of these banks, e.g. Mondo,  still don’t have licenses and their offerings are still immature but its working to a certain extent. According to David Tongue, Mondo will blow Atom out of the water because Mondo is re-imaging it”. His main argument is that the features Mondo have established have provided purposeful utility and met user needs, solving problems that customers actually have. For example, forgetting to check out on undergrounds or wanting to be alerted about the card in case of fraudulent spends, they will remain aware for you. Besides, public third party platforms like Facebook chat etc. are also made available options that customers can use.

Savings

In case of savings, one of the standouts is Acorns, which will round up your spending and make savings for you. It’s not something visible -for example, you put a portion of your monthly salary tosave it, whereas Acorns automates saving by taking each of your transactions and makes a micro investment.

It is more like you forget about your savings and it handles it for you. It is hard for people to make the right investments. This is also handled by Acorns where you just wish to invest and the rest will be done by Acorns.

Credit Monitoring

Credit scores are a little more complex in all the developed and developing countries. For a typical person, trying to build their credit score is complex and confusing. However, FinTechs have made the credit monitoring better. Credit is a very abstract concept though credit scores provide people with a concrete value to make sense of this abstract notion of financial health and ‘borrowing worthiness’.

‘Clear Score’, for instance, provides customers with a clear credit score. It gives users a credit score which is simple and informative. It also provides tips for improving credit score.

Payments

Fintechs have also tremendous effect on making marvelous changes in the mode of payments, of which ‘Square’ is a great example. As a product manager it does the basic rights and solves the needs of its users well. Square thought, ‘Why do merchants need to have clunk ‘Point of Sale’ terminals to be able to take payments? Why do these terminals need to cost lots of money? Based on that perspective, it made payment easier to easiest.

The Future

FinTech is a pretty generous term used to describe an industry that’s been going under change for some time and currently undergoing rapid reinvention that modern technology brings with it. There will be a lot of failed startups on the argument pile but in the same time a number of unicorns will emerge  in Tom Blomfield’s words, ‘this era we will see a bank born that will be as big or as Facebook or Google’ and this is something that will come true.

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