School of Information Systems

Financial Technology (Part 4)

FinTech encompasses a new wave of companies changing the way people pay, send money, borrow, lend, and invest. The most disruptive sectors – or at least the ones that we hear the most about – are payments and money transfer, with TransferWise (money transfer), Square (mobile payments), crowdfunding (Kickstarter, Crowdcube, Smart Angels), and peer-to-peer lending (LendingClub, Zopa, Pret d’Union) increasingly becoming household names and products.

London is clearly the leading Fintech hub, followed by New York, and other cities fighting to get to the top (Paris, Hong Kong, Singapore, Tel Aviv). FinTech investments reached $22 billion (including $4 billion insurance) in 2015 and are expected to increase significantly, so there is room for new players.

The birth and rise of FinTech is deeply rooted in the financial crisis, and the erosion of trust it generated. FinTech companies offer trust, transparency, and technology. Start-ups are able to offer services at a lower cost in a more transparent way, through easy-to-use interfaces.

FinTech means “Power to the People!” Take money transfers for instance. By allowing transparency and cutting middlemen fees, FinTech start-ups enable individuals to have control over their own money. FinTech is also widening access to investment opportunities, through crowdfunding. If you have small account to invest, you can still have an impact and potentially reap some benefits.

The lack of infrastructure in developing countries leaves room for innovation that would not find success in over-banked and heavily entrenched economies in the West. FinTech services in developed countries are focuses on online customers, start-ups in developing countries are addressing a broader market: cellphone users. In sixteen African markets, there are now more mobile money accounts than bank accounts. FinTech in developing countries is not only about making existing services more convenient: it’s creating new infrastructure, and providing for greater inclusion of millions of people in the real company.

Sugiarto Hartono