In recent years, the FinTech sector has attracted considerable investment and attention, a trend that shows no sign of slowing down for the foreseeable future. Cutting-edge technology in the area of FinTech impacts almost all segments of the industry, including payments, mortgages, insurance, savings and lending.
One area that truly stands out is the area of payments. The emergence of non-banking entities promises to bring pioneering technology to this space. Facebook and Apple have already made headway; these players are aiming to improve consumers’ payment experiences, to support their core businesses (Constine 2015) (Williams 2015).
It remains to be seen how the banking sector will take up the challenge. In the wake of the global financial crisis, banks have focused much more on compliance-related projects than on innovation and research. It is high time that traditional banks focus on technology-driven initiatives, and invest adequate resources to leverage its potential to corporate and personal banking clients.
The burning question on all of our lips though, is: what is driving these entities disrupting the payments space? hedgehog lab explores some of the key levers of change that are driving the change in the payment space.
Advancements in Technology
The advent of new platforms and technologies like cloud-based solutions, which are not only efficient and cost-effective but also scalable, are enabling rapid enhancements in the payments industry.
Other new technologies that are disrupting the payment industry include biometric security, such as facial recognition, iris scanning, and voice recognition. They not only improve the overall user experience but also provide a stronger security to the payments domain.
Deciphering huge and vast amounts of complex data has become a cakewalk; financial institutions, as well as emerging enterprises, are harnessing the power of this data, to uncover new patterns and glean new client insights (Mellon 2015).
Trends in the Agora
The word Agora (pronounced 'Ah-go-RAH’) was used by Greeks to describe open-air markets in the good old days. Hence we decided to use the word Agora rather than using the traditional vocabulary ‘market’.
The emergence of new technologies across the globe has had a huge impact on developing Agoras like BRICS (Brazil, Russia, India, China, and South Africa). These economies have embraced innovation more rapidly than the developed ones.
The pace at which the growth of mobile phones has surpassed the human population indicates that there is a great possibility of providing value-added services and products to populated areas that could not be reached before the rise of high-end technology (McGrath 2010).
The advent and the spread of these new technologies certainly opens up horizons for catering financial services to those populations that would have been untouched or less experienced with payment, banking, mortgage or insurance solutions, without a dedicated physical infrastructure.
There is no doubt that the growth and spread of technology would make lives simpler and easier for the customers dealing with various financial institutions, however, it would also bring along the perils of chicanery associated with it.
We are all aware that occupational hazards occupy every event of our lives, and hence, this would call for strengthening regulations in the emerging markets and streamlining systems which would aim to foster confidence in the financial industry.
For instance, the introduction of intraday liquidity and risk management by various systems has resulted in increased transparency and data visibility, aiding cash management and generating cost savings for clients (Mellon 2015) .
We understand that the FinTech sector is going through a metamorphosis stage, driven by several levers of change in the sector. The levers of change are altering patterns of customer consumption in the financial services industry.
Today, the space is vibrant with startup enterprises trying to grab spots in the payment, foreign exchange, lending and savings space. The future of FinTech is bright, as we envisage that with the increase in financial services, disruptive non-banking entities and out of the box solutions, the customer will definitely be crowned as the king of the industry.
If you are a non-banking financial entity, a challenger bank, a neo bank or any agency involved in providing financial products and services, then watch this space for our upcoming FinTech report. Alternatively, get in touch to discuss your needs with us.
Williams, R., 2015. Apple Pay: Everything you need to know. Telegraph.co.uk. Available at: http://www.telegraph.co.uk/technology/apple/11720595/Apple-Pay-Everything-you-need-to-know.html [Accessed March 18, 2016].