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'Fintech' - Evolution or Revolution
Valli Ardalan, Vice President of Marketing & Business Development, Earthport
A rate of change is a relative metric. For some, what seem small steps equate to monumental changes, and to others huge bounds result in tiny returns. In the context of technology, we have never been at a more exciting time with the capabilities now available to individuals and business. The applications and impacts of this vary wildly around the globe, sparking economic, social and technical revolutions. In some parts of the world regular gains from technology take an evolutionary shape where, without any seemingly truly disruptive event comparisons from one decade to the next, they return near unrecognizable results.
Changing for the sake of change is an undeniable waste of time and the financial industry, like all others, is equally guilty of this, in turn inevitably creating cynics and detractors clouding our ability to separate real tech advancements from clever PR campaigns and branding exercises. In a world of ‘fake news’ and an ever-increasing mistrust of content, it has never been easier to dismiss exceptional achievements as more white noise, and never harder to convince the world to engage in revolutionary applications of technology.
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There are examples where it is undeniable, however. Alipay and WeChat pay now boast near 1.5bn active global users combined and have unquestionably revolutionized the payments world in China and South East Asia. Their use of technology such as QR codes and POS facial recognition has enabled them to create fast and seamless transfers of funds from person to person or person to business.
As always, B2B slowly follows its more agile cousin, B2C, into innovation. Relentless customer focus keeps technology in touch, and at times ahead of the requirements of its intended audiences. Consumers are now accustomed to instant payments domestically, digital wallets, signing up with their email address and having more visibility of their personal finances.
Technology is the tool, not the saviour, how we choose to apply it will dictate how it will impact us all
Today there is also less tolerance for friction and more confidence in switching brands. The rise of challengers in Europe and the UK specifically, display an approach to the disruption that resembles evolution more than revolution - essentially using a different medium to deliver the same functions. Not dissimilar to the mini-disk (remember those?) before MP3’s really disrupted the music industry. Also, let us not forget the non-traditional threats like Amazon, Facebook, and Google who are poised to displace the incumbents, speaking a consumer-driven language that older financial institutions are still trying to decode.
There is no better example of this than Amazon. Of the 100m people worldwide who subscribe to Amazon Prime, it is estimated that 65% would open an Amazon bank account if it existed. I suppose this in itself isn’t hugely surprising, convenience is becoming the currency of today. With access to such rich consumer data, Amazon is in a rare position whereby it has the opportunity to use this to intelligently target customers with financial products such as real-time micro-credits. As such, not only are they offering increased value to the usual Amazon experience, but also exposing customers to a new range of financial products with the volume and power to potentially disrupt the way customers interact with and consume financial products going forward all together.
It is increasingly important to remind ourselves that technology is the tool to address the customer need, and when used out of context it can detract from, rather than enhance, the experience. Today the use of AI to automate and improve the process of personal loans, financial management, trading and a variety of other products is driving real disruption. Firms like Oak North are able to offer loans to small businesses in a fraction of the time than that of the incumbent banks, and do with a higher level of confidence on repayments and at cheaper prices.
Blockchain may well be the buzzword of the century but actual use cases are still limited, even if highly coveted. In payments, for example, companies like R3 offer blockchain as a solution to the compliance and regulatory hurdles faced in international transactions, while players such as Ripple and IBM aim to use the technology to deliver instant payments anywhere in the world and are making meaningful steps towards secure coins and digital fiat assets. However, we still have some way to go before the trillions of dollars moved around the world each year are doing so via these rails.
Today the term ‘Fintech’ applies such a wide stroke it has nearly no discernible definition. So how do we really differentiate between what is a real disruption or natural progression, revolution or evolution? Have the disruptions made our societies better? This is a question that isn’t easily addressed and one that may be too early to do so. We are in the infancy of what is to come and as a point in time represents a millisecond which may well be remembered as the seed that spawned what is to follow, whatever that may be. Technology is the tool, not the saviour, how we choose to apply it will dictate how it will impact us all. However, if we continue to focus on the customer need, remain aware of our socially conscious and work to solve, rather than create problems, the opportunity is limitless.