FinTech in 2018

FinTech or Financial Technology refers to a business providing financial services using IT, modern software, web.

On the eve of FinTECHTalents (Oct 30–31, 2018) that will take place in London let’s review how fintech startups live today.

Glossary

Financial technology has been used to automate insurance, trading, and risk management.

AML — Anti-Money Laundering (AML) refers to existing laws or procedures meant to reduce illegally obtained income.

APIs – an application programming interface – is a set of clearly defined methods of communication among various components, which helps fintech firms to connect with banks, insurers and other service providers

Blockchain — represents a decentralized control system for cryptocurrencies. It is a chain of blocks containing all information about transactions. Once saved, data cannot be modified.

Cryptocurrency — alternative or digital currency. This asset was created as a medium of exchange. The first one, Bitcoin, was launched in 2009.

EMV — Represents the global standard for credit and debit cards. The title comes from its original developers, Europay, MasterCard, and Visa. Many cards already feature the EMV chip designed to fight card fraud.

Encryption — The process of encoding messages. Data, like names and numbers, is turned into a code using algorithms. A key is required to turn that code back into useful data. This process ensures security as others.

KBA — Knowledge-Based Authentication aids are used for fraud prevention. Consumers probably know this as the “secret question” users must answer before being granted access.

Mobile banking — service allowing customers to make transactions remotely and directly from their mobile devices. It’s not the same as Internet banking due to the use of special apps.

Open banking – is the use of open APIs that helps third-party developers integrate services and soft. This concept also means the high level of transparency and compliance with GDPR.

Payment Gateway — A service provider that authorizes credit card payments. They act as an intermediary between a payment portal, like a website, and a bank.

PCI Compliance — Payment Card Industry Compliance is a set of security standards designed to protect card information during and after financial transactions.

POS — Point-of-sale is that important step where customer payment information is taken at a physical location when making a purchase. Several popular FinTech startups have created apps and services to expedite this process and keep it safe.

P2P Lending — Peer-to-peer lending, or Social Lending, involves lenders loaning money directly to borrowers without the traditional processes and structures. Online platforms match lenders and borrowers where the services can usually be provided at a lower cost than traditional institutions.

Robo-Advisors: Automate investment advice.

SSO: Single Sign-On authentication saves users from the barrage of IDs and passwords by allowing one set of login credentials to sign in for multiple applications.

Smart contracts — Computer programs that automatically execute a contract. These automated and often blockchain-based contracts could save time and reduce costs in common transactions.

SaaS — Software-as-a-Service. A vendor is paid to hosts applications on a cloud for users to access online.

Techfin — references a technology firm that finds a better way to deliver financial products as part of a broader offering of services. Examples of techfin companies include Google, Amazon, Facebook, and Apple (GAFA) in the U.S. and Baidu, Alibaba & Tencent(BAT) in China.

Techfin firms start with technology and wonder how that can be used for commerce and trade. Alternatively, fintech firms start with existing trade structures and wonder how to make them cheaper and faster with technology. I liken it to fintech firms are making faster horses whereas techfin firms are working with airplanes. — Chris Skinner

Tokenization — Replaces sensitive data with unique symbols. These “tokens” allow users to retain essential information about their credit cards and transactions without compromising security.

Underbanked — People who don’t have access to proper banking or services offered by retail banks. They might have a banking account but rely largely on alternative methods. The ability to serve the underbanked is considered one of the most important facets of FinTech.

For several definitions special thanks to Dataconomy Media.

2018 State of things

The history of fintech starts with credit cards in 1950 and ATMs in 1960. Financial technologies entered the Internet with e-commerce and online services.

In the 21st century FinTech flourishing with mobile wallets, payment apps, robo-advisors for wealth and retirement planning, equity crowdfunding platforms for access to private and alternative investment opportunities and online lending platforms.

Apple Pay, for instance, is on the rise and expected to generate close to 190 billion U.S. dollars in transaction value in the United States by 2021 with the number of users projected to reach over 60 million before 2020.

More commonly, fintech refers to non-traditional financial offerings such as PayPal, Zelle, and Venmo in the U.S. and digital-only Starling Bank, Monzo and Revolut in the U.K.

2018 is the record year as Fintech.global statistics says:

  • The global FinTech sector raised $41.7bn in the first half of 2018, surpassing last year’s record total
  • Capital raised in Q2 2018 surged to reach a record of $32.2bn. This represents an increase of 3.2x compared to the same quarter last year.
  • The largest deal in H1 2018 was $14bn investment in Ant Financial. This was followed by a $4bn funding round raised by Block.one, an end-to-end blockchain solutions provider, in the largest initial coin offering (ICO) to date.

This is not surprising: almost every accelerator nowadays provide special programs for FinTech startups.

The whole research is also provided by Kpmg.

Last years Forbes released annual lists of Top-50 fintech startups.

This year in the head of the list we find Acorns, Addepar Build and Adyen.

Acorns helps customers invest, spend and earn directly from their mobile apps.

Addepar is investment management platform, and Adyen — is a payment and risk management platform from the Netherlands.

Want to read something about fintech?

  1. The FINTECH Book by Susanne Chishti, Janos Barberis
  2. FinTech Innovation: From Robo-Advisors to Goal-Based Investing and Gamification by Paolo Sironi
  3. Dollars and Sense by Dan Ariely and Jeff Kreisler
  4. Smarter Bank: Why Money Management Is More Important Than Money Movement to Banks and Credit Unions by Ron Shevlin
  5. ValueWeb: How Fintech Firms are Using Bitcoin Blockchain and Mobile Technologies to Create the Internet of Value by Chris Skinner
  6. Financial Inclusion at the Bottom of the pyramid by Carol Realini and Karl Mehta
  7. How Money Got Free by Brian Patrick Eha
  8. Open Banking Strategy Formation by Paul Rohan
  9. Bank 3.0 by Brett King
  10. Blockchain Revolution by Don Tapscott and Alex Tapscott

And here are more than 30 books about financial technologies.

The threat of FinTech is the impact it will have on customer expectations towards banking services. — Director/Head of Department at one of the leading banks in the Netherlands.