Tech is disrupting the world in more ways than ever before and finance is one of those fields. Fintech is a word derived from finance and technology. It means the convergence of finance and enabling technologies.
The disruption began slowly and most financial institutions disregarded it. But now wave has become so strong that most financial institutions will ignore it at their own peril. The problem now is that most banks view fintech as an enemy that will take down the brick and mortar financial institutions. Other banks have developed a charm offensive attitude. Barclays UK Plc is a good example. They have developed a fintech innovation hub where they can incubate and provide valuable skills to start-ups and probably use solutions developed by the start-ups in their product offerings.
Just recently, the financial stability board of the EU added fintech as one of the things it should be worried about. The worry is that fintech could pose a system risk to the larger financial industry. A particular concern for the board is bitcoin, an online currency which is based on a system referred to as block-chain.
Another problem for bankers is the entry of huge non-financial corporations in the financial sector providing cheaper and convenient solutions to consumers. Here we have Apple with Apple Pay, Samsung with Samsung Pay and a raft of other companies joining the bandwagon.
Fintech brings a number of solutions to consumers, for example, financial inclusion, digital wallets and easing of payments. Through fintech, one can make payments via the phone. One can also have a digital wallet where they can store their data and financial information and allow third parties to tap into this as they see fit. Financial inclusion means that a lot more people can have access to financial solutions like never before. A great example of this is M-Pesa, the Kenyan platform which sought to bank the unbanked.