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New approaches to not only provide access and usage of financial services via new technologies but also new methods to address “financial health of individuals” and even to improve regulation and supervision via RegTech
FinTech companies are exploring opportunities in a broad range of subsectors Thousands of companies are developing products and services in each subsector Each trying to address inefficiencies or unmet demand
Globally, access to mobile phones and especially the internet is one of the most important cornerstones to fintech and where we see the most impact. Most emerging markets are now focusing on a mobile first approach to financial services
Beyond the internet additional drivers include affects from the tightening of banking regulations after 2008 with needs coming from consumers and SMEs that banks left behind, needs for faster and better money transfer and payment options, especially in markets with limited infrastructure, new technologies and analytical tools like big data and private investment.
When we follow the money, in terms of investment, we see the majority of investments last year going into lending platforms and technologies including consumer finance, peer-to-peer platforms and marketplace lenders, payments including mobile payments, banking technologies, insurance and remittances.
One of the biggest moves today is the transition we are witnessing from physical debit/credit cards (in markets where they are common) to virtual mobile cards.
In fact the entire global mobile payment industry driven by FinTech is one of the fastest pacing developments we have seen and is projected to be a trillion dollar market by 2019.
In fact in most emerging markets, mobile phones are being turned into mobile point of sale machines especially with various central banks agreeing with new international QR code standards being supported by MasterCard, Visa and AliPay. This dramatically reduces the costs and expenses of deploying traditional POS machines and leapfrogging business payments where overnight millions of SMEs across China and India now can accept mobile payments. A feat that would never have been possible deploying costly POS machines.
Another area where FinTech has had the greatest impact is in enabling third-parties from post offices to supermarkets to SMEs to become financial access points for banks and other financial service providers such as e-money issuers. Globally, there are now over 5 million registered agents around the world, more than all bank branches and ATMs combined. China, India and Bangladesh alone have opened over a million agents recently. In the past five years, Malaysia went from 46% of communities served by banks in 2011 to 97.4% via agents at the end of 2016 and now boost one of the most financially included countries in the world.
Traditional ATMs are also being displaced by smart terminals especially in Eastern Europe. This new smart terminals can often provide as many services as physical agents at reduced costs with several countries combining these two models to provide outreach, even in hard to reach areas.
The rise of e-money issued by e-money issuers, specialized financial institutions and new niche banks as well as simplified bank accounts with tiered KYC have alone provided access to more than 1 billion people in less than a decade, by far one of the fastest growing innovations, which combined with new access points have had more impact on access to financial services than any other innovation in history since the invention of physical cash.
A rapidly growing crop of technology-focused lenders are putting customer needs, big data, and advanced analytics at the center of their business models. They offer more trusted, transparent, faster, easier, and better fitted financing solutions today’s MSMEs and consumers seek. Their clean, simple and friction-free application processes allow applicants to apply on any device at any time with much of the data collection being automated. When faced with a long-form bank application that requires the submission of a lot of documentation and a multi-day/multi-week decision timeframe or the streamlined processes of the innovators, many MSME owners and consumers will choose the latter. In a short time, these innovators have dispelled the long-held notion that lending to MSMEs cannot be achieved in a scalable, efficient, and profitable manner.
Open banking models, especially the development of PSD2 are expected to have the greatest impact on access to banking and will also benefit banks by helping bring FinTech players and banks together to leverage their core competencies.
As the amount of data grows as more businesses and people transact and broaden their digital footprints, combined with reductions in the cost of data analytics, artificial intelligence from simple chatbots to more advanced applications will drive FinTech going forward.
Digital identification and biometrics are also seen as key enablers driving the fintech revolution. India by far has leveraged their new Aadhar digital ID system to bring hundreds of millions of people, previously excluded into the financial system in just the past 5 years.
Highlight the important prerequisites supporting FinTech in markets globally: Infrastructure (even the lac of physical bank branches, ATMs and POS networks can actually be a plus here as long as mobile and internet access exists) An enabling legal and regulatory environment where we see policies makers and regulators supporting test-and-learn approaches and regulatory sandboxes as well as tiered and flexible licensing (especially for payment service providers) Access to capital markets IT and FinTech expertise – this is where facilities and innovation centers like Unit City are important as well
Risks in FinTech come from new players and products interacting with and connecting to the financial system – the old adage of you are is strong as your weakest link is a challenge for both the industry and regulators With digital technologies come new threats in the case of fraud and cyber crime Data privacy and data protection is also a major concern for the public, government and regulators As more than a billion people have now entered the financial services market in just the past 4 years and many more are interacting via digital means, the issue of consumer protection is becoming increasingly more complicated and hence requires not only regulators and support from the industry but increasingly looking for ways to empower consumers to both protect themselves and discipline the industry - sharing economy
Global FinTech Trends
Global FinTech Trends
USAID �FINANCIAL SECTOR TRANSFORMATION�
What is FinTech?
Financial technologies that create new or
improved financial services for both
consumers and businesses. It includes
everything from personal financial
management tools, insurance, payments,
asset management, credit, savings, back-
end financial platforms, compliance,
blockchain solutions, etc.
Insurance Real Estate
FinTech & Financial
Source: Global State of FinTech PWC 2017
Global Funding Invested in FinTech (2017)
Mobile Payments: Debit/Credit Cards
Transitioning to Mobile Wallet
Mobile Payments: The Rise of M-POS &
World Bank report (Original source of
statistics: Bank Negara Malaysia)
FinTech, Agents & Impact: The Case of
Traditional ATMS shifting to Smart
Simplified Bank Accounts & E-Money
The Rise of the Marketplace Lenders
A rapidly growing crop of technology-focused lenders are putting customer needs, big data, and advanced
analytics at the center of their business models.
P2P Lenders Supply/Trade Financing Online Balance