Over the past ten years, a real revolution has taken place in the field of finance. The infrastructure has changed, and the whole world has moved to smartphones with accessible and cheap internet. Hundreds of fintech companies have been allowed to emerge. Today, any new technology can be used to create financial solutions. But will software development alone affect the continued growth of fintech?
Technological drivers of financial technology growth
Fintech tends to grow through technology adoption, which makes a niche product a little better than traditional banks. Payment services like Stripe or Checkout make online payments easier for businesses, and international money transfer providers like Wise and Thunes are making the service cheaper for people.
Financial solutions are developing at the same speed as Internet technology. Face-ID appeared – face payments were created, fingerprint recognition technology was developed – the corresponding authorization was implemented. In this sense, fintech is ideologically closer to IT companies than to banks.
The differences are only in the speed of technology adoption around the world. Countries with smaller banking system legacies are growing faster in fintech, and those with larger legacies are growing slower. For example, the “let the flowers bloom” approach (loosely translated from Chinese) is leading to the rapid growth and diversification of financial technology. Countries that follow the “these are our rules” approach are also growing, but at a slower rate.
However, there are common features that do not depend on the rigor of regulation. First, fintech seeks to navigate and move from fixed locations to the consumer, or more precisely, to the smartphone of the consumer. Secondly, all startups, especially fintech startups, want to go global sooner or later. Everyone realizes that development opportunities in the market are limited, so they aspire to international expansion.
Western and Eastern approaches to financial technology
After 10 years of rapid development of financial technology, the global agenda has reached regulation. The fintech world is now focused on working with cryptocurrencies and especially with stabelcoins. Stablecoin is a digital currency analogue issued by private companies, backed by 1 to 1 coin, that acts as an intermediary between cryptocurrency and fiat money.
In addition, governments around the world are thinking about how to launch their own digital currency – CBDC (Central Bank Digital Currency). More than 50 countries are already researching or testing CBDCs, and China will officially launch the digital yuan in time for the 2022 Olympics.
Despite the convergence of views between countries on many issues, we still see differences between Western and Eastern approaches to the development of financial technology and the Internet in general. A human focus dominates the European debate, where market players only want to draw a line between people’s privacy and the use of their personal information in new technological solutions. On the other hand, Asia has focused on using technology to control private lives and is willing to make private information open.
Technology is here, time to mature
In financial technology as in any other field of information technology, it takes time from the emergence of the technology to its daily use. The main success factor for a new solution is that it must become cheaper than the technologies already in use.
Fintech development is an uneven process in which everyone looks at each other. But the flagship is still Asia. The Western world is looking closely at the Chinese internet, how e-commerce is created and how it is combined with entertainment. Meanwhile, Asian fintech startups are looking closely at Silicon Valley, for example. I’m a fan of the Chinese internet, and I think Ant Financial and WeChat are setting trends for the world, although both are having trouble now.
What will the new value be?
Today everyone imagines that the Internet will cease to exist as we know it. It will take a different face. Given the trend towards internet isolation in various countries, this shift seems possible. The Internet and our communication in general will change dramatically. But in which direction?
Metaverses, cryptocurrencies and everything that has no tangible form but has value – this is the first technological focus. It is a new form of thing that did not exist in the world until recently. If there is a separation between the internet and the internet, today people are starting to forget these words. This distinction no longer exists, it remains only in the more conservative industries.
Virtual assets are trends. Cryptocurrencies and NFTs will be legalized or banned, but they will stay in our lives one way or another. Some countries, such as China and Singapore, will be the fastest to switch to their digital currencies, foregoing cash altogether. Other countries may recognize crypto assets as digital assets, along with stocks or real estate.
Alongside digital assets, new value classes for businesses have emerged. The value now is the content, time and human attention. Many companies use these metrics nowadays. For example, their business KPIs are not calculated by the number of users, but by the time users spend on the platform or using your product. What the tech giants are doing today is a battle for user time, which has become a new value.
We are in a global market with different visions and paths of advancement, but our technology is global. This means that at different speeds, all countries of the world will find themselves very quickly in our new digital world. It is interesting to see what it will become.