Fintech, one of the newest buzz words to hit IT and finance, refers to financial technology developed to “deliver faster and cheaper financial services.” While some banking and financial professionals are hesitant to embrace these technologies, others have begun to incorporate disruptive technologies like big data, blockchain technology and artificial intelligence to enhance their business’s overall effectiveness. To that end, the Chronicle’s editorial staff is focusing on fintech in this week’s financial news round-up.
Keep reading below to learn more about fintech and how disruptive technologies can enable better business:
Disruptive technologies like big data, artificial intelligence, and increased automation are improving business verticals across the world economy. Why should banking be any different?
To that end, according to prominent banker Datuk Seri Nazir Razak, “Bankers must respond to this Uber moment…Recent data suggests that in the US, the cost of banking intermediation has not changed for 100 years in real terms…banks have not gotten more efficient over the years…which has identified banking as an industry that is very ‘ripe’ or juicy to disrupt.”
Not only are bankers on the ground level seeing this shift in adopting disruptive tech, but top CEOs are seeing it as well. For example, last spring JP Morgan’s CEO, Jamie Dimon warned that “Silicon Valley is coming… (with) hundreds of start-ups with a lot of brains and money working on various alternatives to traditional banking.”
Barry Ritholtz from Bloomberg View recently shared insider tips from San Francisco based firm Financial Technology Partners. The firm released an internal report discussing the financial tech industry.
Diving into industry trends and presenting interviews with numerous fintech executives, the report offers useful intel on fintech and why financial professionals need to sit-up and pay attention.
Ritholtz ends his article by outlining the advancements that his office has incorporated, like the ability to now offer mobile apps for tracking investment accounts and full risk-analysis.
A Citigroup March 2016 report showed that “investment in private fintech had grown from $1.8 billion in 2010 to $19 billion in 2015.” CNBC writer Bob Pasani shares that there are two issues driving fintech: customer relationships and cost cutting.
To demonstrate, he also explains that while the industry is growing, growth has been slow with most of the growth occurring in three areas. The first area is mobile money such as money transfer, mobile banking and payment processing; this area is growing quickly as it has the most direct impact on the general consumer’s day-to-day. The other two areas, consumer lending and personal finance management, are growing as well but at a slower rate. Consumer lending is moving slowly due to funding capacity issues while personal finance is halted as it is difficult to build brand and trust within that space.
Pasani explains that the “potential market is huge” but it’s growth has not been as dramatic as it has been in other markets with an expected adoption growth rate of 10% by 2020 and 17% by 2023.
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