Why the emergence of fintechs?

  • Driven by global trends including regulation, financial services industry needs to reinvent itself in order to be able to distribute its products to broader set of clients. Integrated data management, risk management and capital management are key for making this happen. Fintechs have created a perfect storm in this landscape and offered alternatives.
  • There are a number of elements that have led to a perfect storm for fintechs:
  • New technologies: Blockchain, Internet of Things, Big Data, natural language processing, machine learning, micro chips, cloud and smart applications have paved the way for new financial sector entrants with agility to meet consumer demand more efficiently. Cost of technologies is also decreasing due to diversity of alternatives and open source.
  • Businesss model: Fintechs offer clarity, consistency and less complexity in their business modalities. This is one of the edges over conventional players. Agility and scalability of fintech services are very high in adjusting to new technologies and processes.
  • Low transaction costs: Servicing fees of fintechs have been dramatically reduced thanks to automation and human-free processes vis-a-vis enormous operations like call centers.
  • Capital requirements: due to global policies (G20) and regulation, the financial services capital model has been changing, which can only be addressed through more efficient processes and access to new resources, e.g peer to peer
  • Transparency: This is not only a requirement from regulators globally but also increasingly a common client demand.
  • Regulation: Regulation has actually caused a huge acceleration in Fintech innovation as it has slowed and hampered the large financial services firms who are the focus of regulation.
  • Government support: Fintechs have benefited from the open support of governments seeking to promote innovation and competition in financial services. Grants, tax incentives, regulatory and advisory supports, techno parks are only a few examples to recent governmental policies.