POV

The latest fintech innovations and digital disruption have helped many businesses improve the customer experience and penetrate new niche market segments.

Customers are able to shop and pay their bills in a more convenient and secure way by using digital mobile wallets. Transfer money locally and internationally instantly to friends and family. Get instant financing through a quick, convenient, simple and paperless process.

The last 20 years has brought significant change to our daily lives, and I believe the fintech revolution began some time ago. As we consider today’s fintech space, we can look back on more fundamental change that has taken place including smartphone devices, networks and apps. The evolution of these technologies has played a major role in our ability to execute financial transactions and mobile payments. This evolution has achieved several goals but most notably the reduction of transaction cost and improvement of the customer experience.

Fintech created the most impact in Payment Card Industry by addressing many areas and democratizing the financial services. Using digital disruption, Fintech increased user engagement by reducing transaction and service cost, which is beneficial to customers and the service provider, like the Small and medium-sized enterprises (SMEs). Fintech proved a competitive advantage in the current pandemic condition by offering its services for Direct Benefits Transfers (DBT) or Financial Relief Payments. PayPal the online payment system, has stated that its purpose is to "democratize financial services." In recent years, it has lived that purpose by providing business loans to entrepreneurs and small businesses, especially to those who don't have access to other forms of capital.

The digital disruption has significantly reduced transaction costs by removing manual and paper-based processes. It has enhanced our ability to buy/sell stocks on our mobile devices where previously there was a very manually intensive process of completing paper-based orders, placing confirmation calls and awaiting the transfer of funds to complete the trade. The digital disruption has also eliminated the need to drive to your local bank, complete a deposit slip, deposit a check with a bank teller and receive a paper receipt. Mobile trading and banking have all but eliminated these costly steps thereby reducing transactional costs and, in many cases, fees associated with such transactions. The digital disruption has also improved the customer experience by giving consumers more choices in how they wish to interact with their financial institution and increased the variety of financial technologies such as websites, mobile apps, peer-to-peer payments and integrated payment technologies such as Venmo and PayPal. The digital banking experience has improved customer relationship management, offered consumers more choice in how they manage their money (direct and mobile deposits), how they interact with their financial institution (phone, email, chat, ATM, in-branch visits). Payment apps like Apple pay, Alipay and Paytm already enjoy high levels of adoption. One can use payment apps to buy groceries from a neighbourhood vendor.  Some of these payment apps also offer credit facilities to small and medium enterprises (SMEs). This access through credit would have been unavailable from banks or would have been too difficult to obtain.

On a larger scale, we can see the impact of digital disruption on many industries. The impact of Airbnb on the Hotel and hospitality industry. The impact of Uber on the Transportation Industry and the impact of Amazon on the Retail Industry.

These companies have provided platforms for consumers to do business and improve the customer experience. Fintech has reduced dependence on a few large institutions and has empowered the public and small/new businesses to be able to participate and transact with each other in ways that weren't possible before. This is due to the empowerment technology has given us over the last 20-30 years. Digitally being able to purchase, pay, and track the payment transaction via technology has helped redefine the way we conduct business.  All 3 of the companies above are able to provide platforms where consumers can use their own products/services to sell something they were unable to do so before.

The customer experience has drastically improved due to the emergence of Fintech, Technology has made business and finance more simplified, convenient, accessible, and decentralized at both the macro and micro level. The customer is more empowered than ever before.

Reaching out to underserved and unbanked segments - from individuals, micro business to small business. Allowing them to reduce transaction/service costs, analyse their business performance and receive financing. These niche segments have benefited the most from the Fintech innovation. There are 1.7 billion people (cited in The Economist) in the world without access to a traditional bank account.  Fintech allows them equal, or a more balanced, access to participating in economic activity. 

However, one of the main issues facing Fintech is trust. Humans like to connect with humans. This will not radically change in the near-term, but could develop away from human interaction in the long-term as AI becomes more in-depth, layered and more interactive. It will take some time until Robo-Advisory will own a significant part of our wealth advisory. We trust fintech when it comes to transferring money or executing a trade, but we do not trust fintech, yet, to take over our financial decisions.