FinTech is not an unknown concept with financiers in recent years. It is often discussed in seminars, meetings,…
Since the wave of start-ups that concentrate in the “technology in finance” sector emerged after the 2008 financial crisis, “FinTech” has become the representative of a technological revolution that could completely change banking activities.
1/What exactly is FinTech
FinTech is the contraction of “financial” and “technology” which refers to all technologies related to financial services. It includes companies ranging from small start-ups to larger firms.
FinTech’s companies are divided into 2 groups. The first group includes companies that serve consumers to provide technology tools to improve the capital needs of start-ups, wealth management,… The second group consists of “back-office” companies that support financial institutions in terms of technology
2/Why FinTech is a “hot” keyword ?>
Fintech will be able to rebuild the financial industry and strongly influence the main entities in this sector. Currently, the companies that provide P2P financial activities operate quite effectively. They shorten the approval period for loans from a few weeks in traditional banks to a few hours.
D’ according to Morgan Stanley’s forecast, the volume of online borrowing in the USA will reach 120 billion dollars in 2020 compared to 20 billion dollars in 2015
In the capital market, start-ups and even “large” companies such as Goldman Sachs or the Central Bank of Great Britain are testing the use of virtual currencies to replace traditional payment instruments / transfers >
3/ The risks of FinTech ?
While FinTech companies provide many financial services (online mortgages, retirement accounts), comfort may push consumers to use services that they do not clearly understand their rights and responsibilities. The prospect that either FinTech will replace traditional banks, low-income consumers will not be able to approach banking services.
4/ Investors bet on Fintech ?>>
Hedge funds paid $17 billion to FinTech start-ups in 2016, more than 6 times compared to 2012. Last year, China crossed the United States to become the country with the highest volume of investment in FinTech. There are only a few start-ups going public, so investors are planning a wave of mergers & acquisitions and IPOs in a few years.
5/ FinTech worries the Bankers ?
The answer is “Yes”. Currently, banks accept the reality that technology has a strong impact on the banking sector as well as other sectors. Banks have had a lower starting point than start-ups in the technology race if they do not have efforts to catch up with them, they will face many difficulties in the future.
Currently, banks also have actions to face FinTech. Some banks have used their reputation and technology to test with FinTech. Major banks such as Barclays, Citigroup or Banco Santander SA have created hedge funds to buy the shares of FinTech companies. Nevertheless, it is very difficult to adapt or install new technologies to old banking IT systems.