Fintech, short for ‘financial technology’ seems to be the latest catchphrase in the financial services industry. However, there is more to it than meets the eye. Only last week, Dr Abdalla Kablan discussed this subject during the 9th FinanceMalta Annual Conference.
Fintech is generally used to refer to the segment of the technology startup scene that is disrupting the financial services sector with products that provide solutions such as mobile payments, money transfers, peer to peer (P2P) loans, fundraising and even asset management.
In practical terms, nowadays, an online shopper might choose to pay with a debit card or via pay-pal. Meanwhile, businesses that would have once relied on banks can now borrow from P2P platform specialist lenders.
Threat or opportunity?
Chris Skinner, writer and FinTech commentator, regards FinTech startups as representing the digital revolution for conventional brick-and-mortar banks. Their existence was made possible through Web 3.0 and the mobile network.
The mobile network is enabling everyone everywhere to communicate one-to-one. Now that people are connected across the globe, they should be able to transact real-time, irrespective of what corner of the world they are presently in. Furthermore, this should result in cheaper transactions. Of course, this poses a challenge to the conventional banking model with a physical network.
John Reed, former Chairman and CEO of Citibank said, “Financial services have remained largely untouched by the digital revolution. Bitcoin represents a real opportunity for changing that. Money at its core is simply a ledger for keeping track of debts and Bitcoin is truly the best iteration of a universal ledger we’ve ever seen.”
Incumbent banks need to respond. Banking giants like BNP Paribas, Banco Santander, Citibank and Barclays have reacted, embracing bitcoin and investing to leverage blockchain technology and implementing it into their core back office operations. This technology offers opportunities for current financial services providers like security settlements, real-time trading and even the possibility of recording contracts.
How does the future look for financial services providers?
Dr Kablan believes that FinTech will democratise finance in the same way that the Internet democratised information. Fintech is mainly impacting the areas of payments and lending, driven by a fundamental shift in the way banking is done; a shift from paper to the digital distribution of data.
It definitely does not look as if FinTech is a fad that will disappear anytime soon. On the contrary, Web3.0 is paving the way for the next phase – the Internet of Things. Financial services providers need to reinvent themselves to remain valid. “The financial system is being re-architectured as we speak,” says Chris Skiner. Ultimately, the winners will be those players who are able to make the best use of the data in hand. It could be banks if they optimize their IT systems, or FinTech if they can gain access to the data. Another option would be marrying the two. Will it work? Only time will tell.
Bank of Valletta p.l.c. is a public limited company licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta). Registered Office: 58, Triq San Zakkarija, Il-Belt Valletta VLT 1130-Malta Registration Number: C 2833