Future of Fintech - How Financial Technology is Changing the World
Updated: Jul 31, 2020
Art via Future of Finance
Written by Amitesh Prasad
Financial technology and its usage has skyrocketed over the past half decade. Such rise and growth was more or less unpredictable. The idea behind financial technology or fintech is that it helps make the process of using financial services smoother and eventually helps the country in moving to a more cashless economy. The first Automated teller machine (ATM) installed by Barclays Bank in 1967 inaugurated a new era of fintech, needless to say fintech has hugely evolved over time.
As technology made its way into human lives, it simplified the way payments were made. Banks incorporated various aspects of fintech into their services by developing new frameworks that made payments more convenient , for instance, net banking, credit/debit cards. Countries around the world have fully incorporated fintech because they recognize the fact that transitioning to a cashless economy will not only make it convenient for the population but it will also record every transaction that is done. Thus, ensuring less corruption and putting a halt to other financial frauds.
It also helps in controlling the flow of black money in the economy which leads to economic growth as it reduces the regressive distribution of income. Sweden has significantly reduced cash distribution in its economy and is the first country which is almost a fully cashless economy.
Development and usage of crypto-currency also falls under the umbrella of financial technology however the ban on the sale and purchase of crypto-currency by various countries including India, due to huge frauds related to bitcoins created a certain doubt in people’s mind whether to be completely comfortable in sharing personal information to use fintech. But as time passed by, and security of fintech was strengthened to avoid hacks from external sources, companies regained the trust of the public and haven’t looked back ever since.
Companies like Paytm and Google Pay have made a huge impact on the Indian financial market, amounting to more than hundred million users around the country. These two fintech giants made use of the opportunity when the Indian government introduced demonetisation and banned the flow of old 500rs 1000rs notes in the economy.
As both those currency notes were banned, people started to prefer using online payment services such as the Paytm wallet or Unified Payments Interface (UPI). Fintech has emerged as a multi-trillion dollar industry and its growth is inevitable. Especially with further advancement in technology, new companies can tap into this market bringing in their unique ideas and further expanding the use of fintech in everyday life.
New companies such as goDutch have gone a step further from the facet of individual payments, and introduced group payments in India, the concept of group payments has a huge potential in the Indian market and goDutch has leapt onto that opportunity to provide something unique to the Indian population. They have the chance to compete with other fintech giants in India now that they have procured seed funding from various venture capitalists. Especially in a time like this, during a pandemic where social distancing is of utmost priority, it is crucial to go cashless and use fintech to make payments to ensure one’s safety from the virus.
Various companies like Zomato, Amazon have taken up the initiative of ‘contactless delivery’ where the ordered item is left at the person’s doorstep and payment is made well in advance through the means of fintech apps. So going forward financial technology will play a crucial role in a person’s day to day activities including booking a cab or sometimes even enjoying the casual street food.
The only drawback for companies to fully tap in to the potential of fintech globally are the regulatory bodies of the World Bank which functions on old and already established laws. The problem here is that fintech is an evolving industry and the laws for such an industry need to keep changing as well to ensure that not only the public is well protected from frauds but also allows companies to grow and expand their horizons.
As mentioned in the Regulating Fintech report developed by the World Bank, they proposed a three step assessment which includes studying the legal and regulatory framework and mandate, this will allow them to question the amount of flexibility given to companies and will also allow them to bring about any changes to the mandate if required.
Policy makers can’t afford to remain inactive when it comes to fintech. Even in India, there’s only the prevention of money laundering act (2002) that governs the companies that provide financial products, the legal framework of countries has to evolve for better functioning of fintech and to provide more security to its population.