Contemporary technological innovation in finance shortly called ‘FinTech’ which is evolved after global financial crises 2008 is very much innovative and different from previous financial technology.
New generation FinTech is the combination of different innovative technology like Blockchain, Artificial Intelligence (AI), Cloud Computing, Application Programming Interface (API) etc.This technology together developed a digital and online platform that capable to include people at platform channel, verify them, process financial operations and finally deliver a complete financial service automatically and independently to its client without any banking channel.
FinTech enabled financial service is highly cost effective, faster and convenient compare to the service provided by traditional banks. As a result Tech companies are getting competitive advantage and becoming more efficient and popular to provide financial services than any traditional banks.
Due to attractive business return global investment in FinTech already reached in $59.9 billion within June 2018 (Source: The Pulse of FinTech 2018- KPMG).
As per statista.com report right now more than 5686 established ‘Startup FinTech Company’ across the world providing versatile financial services to billion clients. Also ‘BigTech Company’ like Google, Amazon open their FinTech wings for financial service delivery.
Startup FinTech Firms: These firms are actually facilitated different type of ‘Digital Platform’ for different financial service delivery. ‘Payment and transaction platform’ facilitated its client financial payment and transaction services.
This platform can be categorized as ‘Digital Currencies (DC)’ or ‘Crypto currency’ platform and another is ‘E-wallet /Payment Getaway’ platform. Crypto currency is the product which is convert money into crypto asset and then uses it to payment and transaction to anywhere of the world.Although this currency not yet approved by different countries but there are about 700 Crypto currencies with total market capitalization reached about $106 billion around the world (Source-Financial Stability Board report).
The Bitcoin, Ethereum, XRP, Stellar, EOS, Tether, Cardano, Monero etc. are major market leader of Cryptocurrency.
E-wallet includes multiple bank accounts, debit or credit card for payment and transaction. Major e-wallet are WeChat Pay, AliPay, PayPle, ApplePay, Samsung Pay, Amazon Pay include more than billion users for local and international payment and transaction.
Fund collection and Deposit Service Platform known as ‘Crowdfunding’ platform that facilitate collection of small amounts of money from a large number of individuals to finance a new business venture that provide positive return to baker or saver.
Crowd funding could be different form, like Reward base crowdfunding where backer will get reward against their deposit and investment; some are Project based, where backer will get project output; some are Equity based where backer gets equity or share.
Credit and Loan service Platform-Known as ‘Loan-based Crowdfunders’ or ‘P2P lenders’ or ‘Marketplace Lenders’ that usually involves borrowers being matched directly with investors.
Such digital platforms can facilitate various forms of credit, including secured and unsecured lending, non-loan debt funding such as invoice financing. According to CCAF (Cambridge Centre for Alternative Finance) estimates the volume of new FinTech credit reached $99.7 billion in 2015 in China, $34.3 billion in the US and $4.1 billion in the UK.
According to the World Bank which reported global outstanding loans by marketplace platforms were estimated about $209 billion in the 2017 with 68 million active accounts. Some renowned landing platforms are Lending Club, Prosper, Upstart, Funding Circle, Kiva, Peerform, Streetshares, Applepie Capital etc.
Digital Bank: Also known internet only bank or challengers bank that providing multipole financial services through a single digital platform which is the digital version of traditional bank. People can get multiple financial services only through their mobile apps with a very short period of time.
For example Kakao Bank, one of South Korea’s digital only banks attracts 820,000+ clients, lent $232 million and accepted the deposits $245 million within four days since its launch day at 2017. Ally, B, Bank Mobile, Digibank, Moven are some successful digital bank of the world. Some traditional banks also open digital bank wings to face these new challengers.
Big Tech Companies: BigTech Company entrancing on finance market rapidly. Google launched ‘Google Tez’ in September 2017 enabling users to link their mobile phone numbers with their bank account to pay for goods in physical stores / online and facilitate P2P transfer. Tez gained 12mn active users and more than 140mn transactions as of December 2017 in Indian market.
Amazon offering short-term loans to SME businesses through its marketplace and company has surpassed $3 billion loans within June 2017.
Large FinTech Company: Ant Financial which is world’s largest FinTech Company open multiple wings to provide financial services. ‘Alipay’ is the world’s largest mobile and online payment platform with over 870 million active users and 153mn daily average transactions.
‘Yu’e Bao’ is providing wealth management services which 400 million account holders with $230bn asset; ‘Zhao Cai Bao’ is P2P lending platform.
‘Hua Bei’ is an online consumer loan product offered to Alipay users for purchase of goods or services; ‘MYBank’ online bank of Ant financial have 100 million users on the platform, provides unsecured loans to more than 5 million businesses, and cash management services to 1.4 million businesses.
The Zhmia Credit’ is Online credit score Company have 257 million active users to score for credit eligibility.
Although FinTech Company and its activity already recognized and acquired significant market share in the world, but till it is suffering from cyber security, money laundering, data fixing and other compliance issues.
International and national authorities already included FinTech activity into their existing regulatory frameworks as well as form new regulations to make it more secure, robust and stable.
Finally it can be said people need convenient, secured and low cost financial service and accept from who can provide it better way. If FinTech and company could be more regulated, secured and trusted in near future Tech Companies will be a big player of Financial Service delivery with the power of FinTech.
Muhammad Saiful Islam Bhuiya is Assistant Vice President in Card Division at Mutual Trust Bank