Financial Technology (Part 2)
As alternative finance gains traction with customers, FinTech is approaching its e-book moment – the point at which a critical mass of consumers and business customers see the technology-driven solutions offered by new players in the marketplace as a viable – and often preferable – alternative to the service offered by incumbent banks. The implications for the traditional banking industry are immense. Developments in FinTech have the potential to erode the brand equity of the incumbent players and eat into market share.
Anyone seeking evidence of the potential market power and reach of technology-driven finance providers need look no further than the now venerable PayPal. The payments market is evolving fast and this evolution will chase convenience, speed, and data collation. Witness the initial success of Apple’s contactless payment system Apple Pay, which allows consumers to purchase and pay for goods and services simply by placing an iPhone 6 in proximity to a point-of-sale terminal.
One of the single greatest obstacles is ubiquity – to consumer can be faced with a myriad ways to pay (24/7 real time bank account-to-account transfers in all the major jurisdictions). The use of pre-paid cards is also on the rise. Borrowing and depositing is also undergoing something of a revolution. P2P market not only provides businesses and private borrowers with a source of cash, it also offers investors and savers a place to deposit cash and earn higher interest rates than in a conventional bank account.
Some aspects of FinTech innovation remain well outside the mainstream. Digital currencies, such as bitcoin, potentially offer an opportunity and means to exchange value, but most would agree that the real value will emerge from the application of the supporting distributed ledger technology.
Move away from the corporate face of FinTech innovation – PayPal, Apple, Google, et al – and thousands of companies are working in technology hubs around the world on ways to make familiar activities such as stock trading or money transfers, not only more convenient, but also more attuned to the way consumers use their smartphones, tablets, PCs, and smart watches.