The Surge of Technology in the Field of Finance

The world of Finance is boundless and has been regularized and standardized with the traditional banking services for a good period of time until the need for techno- finance and a set of processes to automate insurance, trade and risk management, trading on capital markets and investments have led to the revolution of Fin-Tech. The concept of Fin-Tech is both implicit and explicit in nature and is drawn down to the study of market and consumers. Research analysis have found out that there are certain areas that have constant growth year to year while extending the reach to certain aspects of Fin-Tech such as platform, crowdfunding, security, as well as industries.

Need/ Emergence of Fin-Tech:

As it is nearly impossible to track the products price (or) supply and demand through the lens of traditional (or) neoclassical economics ever since the financial intermediation has shifted from conventional banks to ‘shadow’ banks, where the non- depository financial institutions do no comply with the traditional banking regulations — the need for protection of consumers and investors has drawn to the emergence of Fin-Tech which provided “Financial Service Disintermediation”. This has severed the intermediation costs and minimum capital requirements and also has optimized data capturing, processing and analysis using big data analytics and data science. This has reduced the search costs to a significant rate.

While there is no specific definition to describe Fin-Tech, researchers have widely classified the technology into themes.

Ng and Kwok classified Fin-Tech into 4 different categories :

Lee and Shin classified the five different elements of Fin-Tech ecosystems :

1. Fin-tech start-ups
2. Technology developers
3. The government
4. Financial customers
5. Traditional financial institutes

Fin-Tech Evolution :

The latest Fin-Tech developments have some potential effects on the global banks and the financial system in general. They are :

• Alternate Lending: New online platforms are offering alternative models of credit intermediation Kabbage, one of the Fin-Tech companies that provides funding to small and medium enterprises precisely explains the idea of alternate lending.e-Commerce websites are also using big data mining to provide online credit to its consumers. The key advantage which is resulting in consumer engagement is the integration of supply-chain finance into financial services.
• Payments and Transfers: peer-to-peer transactions, cross border transfers are considered as the major developments in finance sectors. Apple pay, M-pesa etc are few applications that are majorly used for peer-to-peer transactions. Azimo and Transferwise are used for cross border transfers and are using new business models to make it easier for international transactions without having to the high fees associated with the international transfers.
• Technology driven transactions: Fin-Tech uses technologies like Big Data Analytics, Big Data Mining, Data Science, Machine Learning, Supply-Chain, Block Chain Technology for various activities involved from data gathering, analysis to processing the transactions. The usage of Block Chain Technology for Cryptocurrency, bitcoin is a major turnover for the finance sector. The US Nasdaq Stock Exchange was the first to incorporate blockchain services.

Risks of Fin-Tech environment:

• Lack of safety nets in the business models. Retrieving of data can be a tedious task if there is a data loss.
• Misuse of personal data
• Difficulty in identifying the customers.
• Electronic fraud — (e.g.; Silkroad fraud)

How To Mitigate the Risk:

• The new era of finance should be regurlarized and supervised with the help of business innovations.
• Consumer data protections and education measure needs to be taken.
• To regulate the International transfers as a problem could arise where it is hard to abide to the regulations of either of the countries if they both have different set of regulations.

Conclusion:

As the research and development of the technology is going hand in hand, it is important create more diverse, secured and stable financial services landscape and regulations.

Fin-Tech start-ups can start with risk and internal controls, operational excellence, compliance culture and consumer- employee service engagement that stood as a major affliction to traditional banking. The opportunity for Fin-Tech lies in expanding the market, shaping the customer behavior, and effecting long term changes in the financial industry as the legacy prone/ incumbent banks could give a cutting edge to the nimbe and innovative fin-tech start-ups.

Will the Fin-tech banking services have amicable regulations with traditional banking services ?

Will Fin-Tech take over the traditional banking ? Is Fin-Tech a threat to the Global Banking?

The debate is quite unarguable as Fin-Tech start-ups are in a verge of growth in the finance sector.