The Future of Banking and FinTech
by Mallika Paulraj, Lecturer, Fintech Circle Institute
Industry View from
Not just for Banks – A Primer on the Fintech Ecosystem for the C-suite
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Senior corporate executives can be forgiven for thinking that Fintech is only for banks and asset managers and doesn’t apply to them. This article sets out some reasons Fintech is becoming very relevant to the C-suite.
Sitting on the tube on the way into work every day in London there are dozens of ads to look at. Sprinkled in among the usual vitamins ads these days, however, are a hefty dose of many new trading apps, investment platforms and lending clubs. Every day there seems to be a further accounting or banking app launched to lend you money or invest money you already have. All this is courtesy of one of the most significant trends of our times – Fintech.
Fintech businesses harness the power of technologies to create more accessible and cheaper financial services for all consumers and businesses. There is an existing stereotype that Fintech is the remit of the banks and asset managers and therefore other industries do not need to pay attention.
Senior corporate executives can be forgiven for thinking that Fintech is all investing and lending and doesn’t apply to them. This article sets out some reasons Fintech is becoming very relevant to the C-suite.
Startups are leading the charge in Fintech. According to CB Insights, there were thirty-nine Fintech unicorns worth $147.37 billion in 2018. Unicorns being legendary startups that have a valuation of over a billion dollars. The research also showed that last year 1,707 Fintech companies worldwide raised $39.57 billion. That’s an increase of from just over eight billion dollars in 2014.
Of course, the magic of venture capitalists seems irrelevant to many boards and members of the C-suite, but 2019 is the year that all senior corporate executives need to start paying attention to Fintech. This is because Fintech is becoming an integral part of innovation in many areas of corporate life. It isn’t just for the banks any more, and in this next section, we shall see why.
The prominent IPOs of lending platforms such as Lending Circle and OnDeck capital might lull us into thinking Fintech is a trend ringfenced to the lending and crowdfunding areas.
There are however many different categories of Fintech other than lending such as Paytech, Insurtech, Regtech and Wealthtech. We briefly summarise each below.
Paytech
Paytech services are changing payment processing, consumer card and subscription billing methods. Retailers will have to pay attention as customers seamlessly move around their stores and websites and payment might be taken care of automatically as the customer leaves the shop. No more queuing at the till! International money transfer technology is revolutionising global remittances.
Regtech
Most companies face some form of regulations and tracking the Audit, risk, and regulatory compliance data and processes will be streamlined and less personnel intensive via Fintech solutions.
Wealthtech
The way we invest money is changing via investment and wealth management platforms, and analytics tools are giving the consumers more power. The rise of robo-advise reduce many of the frictions between retail investors and asset managers.
Insurtech
Buying insurance and comparing the market on products is getting more straightforward and more efficient with many startups taking on the opacity of insurance industry quotes and processing.
Digital banking
Web-based tools to manage bills and track personal and credit accounts. Pensions and other HR benefits such as payday loans. There is a movement to open up and digitise the whole pay cheque and employers will have to be part of this change.
Cybersecurity
There is significant innovation happening in the cybersecurity space that protects corporate IT systems and customers from fraud.
So why should you care about Fintech now?
Regulators who have to be very careful about what they allow when it comes to combining the mass market with money and technology is also moving towards acceptance. The UK FCA, for example, has a regulatory sandbox where innovative Fintech startups can try out ideas without the onus of full regulation.
Several technology trends are driving Fintech now – smartphone app ubiquity, Artificial intelligence, wearables, big data, blockchain and the internet of things. Computing power and the decrease in costs of data storage and transmission means Fintech is just getting started.
Instead of getting bogged down in the details of what blockchain or the Internet of Things is, senior executives would be better off looking at some use cases of how Fintech might change their business operations shortly. Use cases of how Fintech is changing their IT management, operations, legal departments and entire customer experience will be required learning in 2019.
To educate yourself further visit FINTECH Circle.
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