Читать книгу The FINTECH Book - Chishti Susanne - Страница 15

By Alexandre Glas

Co-Founder and CMO, The Assets

and Marcin Truszel

CEO, Kontomatik

For a very long time now banks have had to compete primarily with other banks. These were the times of mass branch openings, bold marketing campaigns, and ongoing competition for the highest interest paying accounts. In 2015 FinTech became not just “a” buzzword but, arguably, “the” buzzword and this shows no signs of changing. Now direct competitive pressure for banks is not only coming from other banks, but from thousands of FinTech start-ups and powerful tech giants with enough capital to cherry pick the most interesting areas of banking to leverage their own business models and millions of customers.

For decades, universal banks have been serving the full scope of financial services. In most countries, competition in the banking sector was moderate, since the bulk of jurisdictions had just a few large banks that accounted for quite a large share of the market. It was thus rarely possible to see a bank that had grown from a small one to a large industry player. While banks try to offer a wide scope of services, there are many innovative FinTech companies that just focus on the development of one simple service with great user experience. This certainly makes the lives of banks harder, as it is simply impossible for a large organization to achieve sustainable growth in every niche of the financial services sector. This development refers to the “unbundling” trend, meaning that FinTech firms focus on distinct areas of banking with the goal to become the “best of breed” providers in these areas. Therefore on an aggregate level there is a danger that the banking service offering overall is “unbundled” by the best FinTech providers in each category.

While the residents of developed countries certainly enjoy doing their banking activities from the comfort of their homes with the benefit of online banking, we can still see that online banking is not widely present or not present at all in emerging markets. However emerging markets will experience quite rapid growth and substantial improvement in financial services provision. This process should take substantially less time than it took developed markets to achieve. This will be quite a similar scenario to what has already happened with the development of internet networks in such countries. While residents of developed countries have been steadily moving from one type of connection to another, it is not at all unusual to see developing countries quickly jump from a common 56k modem to high-speed wireless connections straight away. In other words, developing countries tend to start and stay on the low-end technology for longer than developed countries; however, they then skip many stages and quickly adopt the most developed product.

Regulation Supporting the FinTech Sector

2015 began with exciting news coming from the United Kingdom, where the government announced the initiation of a data sharing and open data initiative in banking (open Application Programming Interface (API) initiative).22 UK officials are planning to implement a detailed framework for an open banking data environment that can be used by banks and FinTech companies to collaborate more for the benefit of their customers. The objective is to boost competition for the benefit of consumers. This is an important step, as thanks to the influence from the UK government many innovative organizations could get access to financial data going forward.

Another important piece of legislation in Europe is the Payment Services Directive 2 (PSD II). Although the whole analysis of PSD II is rather complex and beyond the scope of this chapter, in summary the European Parliament also wants to see easier access to banking data to enable innovation while at the same time preventing any data misuse and security breaches.

Wearables, Foreign Exchange (FX), Bitcoin, and Blockchain Trends

Having reviewed regulation trends, we now want to highlight key applications of FinTech. In the foreign exchange sector, services like WeSwap23 are entrants into the currency exchange market, but they are doing things quite differently from the traditional money exchanges – WeSwap actually allows people from different countries to interact and exchange local currency at a pre-determined local rate, far cheaper than the commission traditional money exchange businesses place on exchanges. WeSwap is backed by MasterCard24 and is expected to grow exponentially over the next 18 months.

Although not yet commonplace, smart wearables are set to revolutionize the banking industry. The forecast for shipping wearables in 2015 is 45.7m units25 and this is only going to increase. The Apple watch already allows the wearer to check their banking balance, track their transaction history, and find a nearby branch – once the mobile banking transaction systems are expanded and improved, the functionality of these smart wearables will only increase further. Jeremy Mugridge, Marketing Director at Instinct Studios is quoted as saying, “wearables have been around for a while now, but we’re likely to see this gain momentum after the release of Apple Watch. 2015 will be the year where we’ll see a shift in focus from health and fitness towards other areas like people’s financial health.”26 For those of you who doubt that smart wearables will become that popular, take a glance at your smartphone and think back 10 years.

It is perhaps no coincidence that after the economic crisis, driven in part by banks, consumers are now paying closer attention to their own finances than ever before. Indeed, several apps have been created to allow consumers to do just that – one app, called Spendific, connects to a user’s bank account and, after taking into account all of their outgoings, states what is left to spend. This is updated in real time as purchases and payments are made from that account. This innovation, though, is comparatively basic when compared to MoneyHub, who have developed an app that does something similar, but also includes long-term savings in the financial planning process. Things like buying a house and desired retirement age are included and different scenarios can be created to see what impact the consumer’s decisions will have on their financial outlook.

More and more financial services provision is being conducted online and as Generation Z (the demographic segment born after millennials) will only ever know “mobile”, it should come as no surprise that this is and will continue to be the case. Smart wearables, specifically technologically advanced financial apps and an increase in mobile payment opportunities, are the result of consumer demand.

Although they are taking a somewhat slow foothold, there are clear signs that crypto-currencies are here to stay – for example, California made them legal tender in 2015.27 In Europe some countries are already seeing bitcoin – an example of a crypto-currency – take hold in bartering-type exchange systems. Arguably, there is not yet a bitcoin usage model quite where the industry needs it to be, but this will be developed over time. However, the development of all of this could be hindered by regulations and national laws. Seen from an idealistic viewpoint, people would be able to use bitcoin, or other crypto-currencies, anywhere in the world, instantaneously. Yet, with different rules and regulations governing states and the different financial institutions involved, getting unanimous agreement on how crypto-currencies should work could prove difficult.

In this respect, blockchain (the technology on which bitcoin is based) is a distributed data store that holds a public ledger of transactions for crypto-currencies, such as bitcoin itself. A dedicated chapter in the book covers crypto-currencies and blockchain technology.

It is clear that FinTech has already made huge inroads into many aspects of our daily lives. What is perhaps even clearer is that the surface has barely been scratched in relation to what FinTech can do for us all in the future. As we consumers become ever more demanding and discerning in our choices, you can expect to see financial institutions rely increasingly on FinTech developments to provide the solutions to keep us happy and meet our needs.

In summary, we are now living in times of significant transformation of the banking sector. We can probably assume that banking over the next 10 years will experience a higher degree of change than in the last 100 years. Financial technology innovation has started a global shake-up of the sector. Now the most important question remains: will banks be able to successfully embrace FinTech innovation or not? FinTech is set to play a bigger role in your life than you might have ever expected.

22

Source: https://www.gov.uk/government/consultations/data-sharing-and-open-data-in-banking-call-for-evidence/call-for-evidence-on-data-sharing-and-open-data-in-banking. The application program interface is a set of routines, protocols, and tools for building software applications. The API specifies how software components should interact. See the chapter entitled “Embracing the Connected API Economy” for further detail about APIs.

23

See https://www.weswap.com/en/.

24

See https://www.weswap.com/en/learn-more/.

25

Ibid., and see http://www.idc.com/getdoc.jsp?containerId=prUS25519615.

26

“FinTech Trends and Predictions for 2015”, 14 January 2015, http://www.bobsguide.com/guide/news/2015/Jan/14/fintech-trends-and-predictions-for-2015.html.

27

“Cryptocurrencies made legal in California”, 8 January 2015, http://www.bobsguide.com/guide/news/2015/Jan/8/cryptocurrencies-made-legal-in-california.html.