FinTech companies are amongst the fastest growing organizations today, attracting investments from venture capitalists and others, an amazing number of start ups entering the market on a weekly basis. Fintech has changed the way people use physical money, how they exchange it for goods and services, and even invest it. Fintech is making the dream of cashless systems a reality and the fintech industry is helping improve efficiency and make systems more transparent.
For the common man, fintech is yet another term that’s vaguely understood. Fintech is the abbreviation of Financial Technology and refers to innovation in financial services facilitated by the latest technology. Fintech has come to be used for businesses that offer financial services with the aid of software and modern technology. It encompasses the entire spectrum of finance related services from cash transfers to bitcoin purchases, in this era of rapid change in the financial world. Fintech has been gaining ground in the last few years as financial services turned increasingly towards technological innovations to transform the traditional methods of saving, spending and managing money, while economies sought ways of becoming increasingly cashless and transparent. The use of technology helps these fintech companies collect vast amounts of data, and use it to enhance the customer experience, attend of all his financial issues, be it saving, insurance, transfer or investment, while ensuring safety and security.
Few Facts to know
- The use of credit cards, internet banking, PayPal, Google Wallet, Apple Pay, are all part of fintech, involving the customer, the ecommerce retailer and the bank facilitating the payment. Similarly, share trading, mortgage deals, comparing insurance offers, all fall under the fintech gambit.Technology use for all these started a couple of decades ago, but the newest innovative technologies are enabling a seamless integration of multiple requirements of the tech savvy millennials, in particular.
- Fintech companies have started competing with banks and other financial institutions, offering similar services at lower costs, faster speeds, and reaching remote customers, where the former have not been able to.
- Mobile technology is a major driver of fintech success, and mobile phones are helping push growth by providing services to the common man that were once accessible only by institutional customers.
- Fintech companies have been multiplying rapidly in every country, led by China, which boasts of the top two, biggest Fintech companies. China’s mobile payments’ service, Alipay, is the world’s largest fintech company valued at $ 60 billion.There are nearly 10,000 fintech start-ups today, 2500 of which are in Asia alone, with new ones opening monthly, if not weekly.
- Two out of every seven people around the world are using fintech in some form or other, and companies are scurrying to catch the remaining five! These include start-ups, banks and existing financial institutions. The result of this is increased competition, better services and lower costs.
- Global investment in Fintech has increased manifold with increasing interest from venture capital firms, and stands at $ 31 billion in 2017, according to a KPMG report.
- A fintech start-up valued at over $ 1 billion is called a ‘unicorn’ or ‘fintech unicorn’. In the year 2017, 57 start-ups became unicorns, including the US based, social news aggregation, Reddit. Investors and financial sector experts believe that these companies will drive growth in the future.
- Insurtech which uses technology for the insurance sector, is part of fintech. It happens to be one of the big 5 of fintech, along with Blockchain, AI, RegTech and Financial Inclusion. Insurtech will transform the huge insurance sector and facilitate claims payments etc and make selection of products easier. Other popular sectors in it include mobile and internet banking, crowdfunding, peer to peer lending, predictive analytics, smart financial management and so on.
- Fintech companies are being considered to be disruptive by the banking sector, since they are threatening the latter’s hold on the financial services domain. New technologies always challenge and disrupt the way existing markets and systems work, forcing individuals also out of their inertia to make changes in the institutions they have learnt to trust. Fintech is also restricting the services of the unregulated sector, cutting out middle men, and offering quicker and easier solutions. This is considered disruptive and likely to wipe out a segment of existing businesses. In reality, fintech companies are offering stiff competition, higher efficiency levels, finding new ways of accessing data, and thus, improving the customer experience. Now, many global banks and investment companies are increasing their partnerships with fintech companies.
- Fintech is popular not only with the millennials even as it attempts to reach the rest of the global population, it is being supported by governments as well. Governments of Singapore, Thailand, UAE, Canada, Hong Kong, Malaysia and Australia are all pushing for regulatory innovation in this field, and each has its own regulatory sandbox in operation already. A sandbox is a platform provided by regulatory agencies to try out business models which do not have legal clearance.
Fintech in Myanmar
Fintech companies have managed to penetrate where the banking sector could not, in Myanmar. This is one country where barely 20% of the population has bank accounts, and informal routes were used for decades to send money to homes and families by migrant labour that relocated to urban areas in search of employment. Similarly, the unregulated money lending sector has flourished where high monthly interest rates are charged, and the number of defaulters is not insignificant. Fintech in the form of mobile transactions are the quickest and most feasible solution for the country, provided using such services is learnt fast enough. The unbanked section of population is doubtlessly the biggest beneficiary of fintech innovations.
While internet banking and credit cards remain the privilege of a few, mobile money transfers have now become easy. With 60% of the population having access to mobile phones, Wave Money, a joint venture between Telenor, the mobile network provider, First Myanmar Investments (FMI) and Yoma Bank, has succeeded in reaching the most remote citizens of Myanmar. It has developed a mobile money transfer platform that facilitates sending and receiving money through a mobile phone, which can be collected or paid to one of the vast network of over 5000 Wave agents and merchant outlets that have opened across the length and breadth of the country.
Taking a cue from this mobile payments platform, the well known City Mart Holdings has offered e-wallet solutions to its customers in a tie up with a Thai e-wallet start up T2P. the supermarket chain already accepts credit card payments from customers. More and more fintech start ups are tying up with international partners to offer financial transaction solutions to the people. Now, the factory worker in Yangon, or the shop salesman is able to send money every week to his parents in a village in northern Myanmar and to his sister studying in Mandalay, effortlessly, and without any risk of the money being lost in transit. For Myanmar the jump from cash to digital transactions is huge, but it is offering an opportunity for the first time to remote businesses, to gain access to cash and loans, and make repayments. This is making money transfer easier, safer, and risk free. Simply taking a cue from the accelerated pace of change in the fintech industry will benefit Myanmar’s people in their simple transactions, banks as they grow and expand, and financial institutions as they evolve and offer services previously unavailable here.