The next decade of fintech

By Bakenhuscon The Capital. Over the last 40 years, technology has reshaped many areas of finance. In the 1980s, high-frequency trading and ‘portfolio insurance’ was introduced as markets moved online. Bloomberg terminals defined interaction with financial data as computer-mediated. Gradually, more areas grew online and by the end of the 90s PayPal was founded, bringing fintech innovation to the consumer (and helping people buy from Amazon in the process). Now in 2020, names like Robinhood, Monzo, bitcoin, and Lemonade are common, as fintech has reached a wide audience.. How will the next decade chop and chew fintech?. One telltale sign is found at the 90-year-old Bank of International Settlements. The international organization that facilitates cooperation among the world’s central banks has a section on their website dedicated to fintech and innovation. The bank has been prolific in producing high-quality researchon the drivers of global fintech adoption, the challenges of financial inclusion via fintech, and addressing the fintech data gap. In these reports, technological innovation applied to payments takes center stage for its potential in enabling safer, more transparent, and trustworthy systems. BIS is not alone. The IMF, World Bank, and OECD have all released reams of research on the topic.. Central banks around the world are reading this research closely. The first country that comes to mind with respect to central bank adoption of fintech is China. PBoC has signaled interest in a digital currency for years. A domestic market infrastructure where WeChat and Alipay are by far the usual means of payments, more influential that card transactions, demonstrates a deep integration of this mobile fintech has in China’s financial system. Already, PBoC has trialed implementation, suggesting the future of payments in here now in the middle kingdom. Other central banks have begun to pile on. The Bank of England, Bank of Japan, the European Central Bank, Bank of Canada and the Swiss National bank have all joined the BIS in creating a framework for cooperating in researching and developing central bank digital currency.. The Federal Reserve has also signaled research into digital currencies. The Fed’s interest, however, may be seen as a reluctant adjoinder, only reacting to the growing interest around the world rather than leading it. The Economisthas been quite frank in expressing fintech and the Fed as a wedge issue in recent geopolitical relations.. Photo source: Infrogation of New Orleans. Yet, in reflecting on the past forty years of fintech, it is clear that the US’s leading incorporation of internet technology in the financial system was led by Wall Street. In the 90s, American banks serviced international clients. The SWIFT system, founded in 1973, established bank to bank global connectivity through telecommunications infrastructure. Bloomberg terminals were in Japan 30 years ago. BankAmericard, building its international brand through the technology of plastic, changed its name to Visa in 1976 to appeal to an international audience. These examples, along with PayPal, deep analytics of US quant money managers in the 90s, and the innovation that created financial derivatives are all applications of technology in finance, even if they don’t fit the current conceptualization of fintech.. If the US has led fintech adoption since the 1970s, what then is different about the new wave of fintech?. It may be due to the mobile revolution. Smartphones were introduced in developing countries in 2008 with the release of the iPhone. Before smartphones, the internet and mobile access were predominantly in advanced economic zones like the US, EU, and Japan. As ITU data shows, now this connectivity has exploded in the rest of the world, enabled by advances in technologies and open source operating systems that that make cheap mobile phones widely available. In India for example, the smartphone market grew at a compound annual growth rate of 37% from 2014 to 2017, according to a KPMG Impact Report.. Mobile-cellular subscriptions, by level of development; Source:http://www.itu.int/ict/statisticsThis supercharged mobile connectivity in emerging and developing economies is in part responsible for the increased interest in fintech. A lack of entrenched financial systems, such as the ones established by the global popularity of Visa and Bloomberg, provided a blank space of unmet demand for financial services. According to a BIS report, the new wave of highly mobile and consumer-oriented fintechs thus have been enabled to create their own, separate digital banking and payment systems which integrate seamlessly with developing eCommerce and debt market structures.. Financial systems are ultimately built on trust. You accept the green pieces of paper called dollars or carry plastic with the blue and gold Visa brand because society and life experience indicates these items have lasting consistent value as money. Emerging economies’ high-speed fintech adoption as well as the international cooperation on digital currencies in advanced economies suggests that a totally new international financial and payment system is more or less, almost here.. Whether this new system will continue to accept green dollars and blue and gold plastic is, at this point, still under research and development.. The Capital. https://medium.com/media/3b6b127891c5c8711ad105e61d6cc81f/hrefThe next decade of fintechwas originally published in The Capitalon Medium, where people are continuing the conversation by highlighting and responding to this story..

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