Fintech Guide

State of Fintech 2017

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P2P Payments And P2P Lending

The rise of smartphones and of mobile solutions as innovative as Square and NFC-based systems have created new opportunities for small businesses. Merchants as small as individual glass artists selling out of their studios or at art fairs and garage sales can now accept credit card payments instead of cash.
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Bitcoin And The Rise Of Cryptocurrency

A customer can pay a business online in dollars, euros or yuan. They can enter their credit card into an online payment gateway, transfer funds from one digital wallet to another or flick money across a social media network but those transactions will always have one important element in common.
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Introduction: A Whole New World of Financial Tools

It doesn’t look like much. Thick, obloid, and made of electrum, a naturally occurring alloy of gold and silver, the 1/6 stater on display in the British Museum is one of the oldest coins in the world. Manufactured more than 2,700 years ago in Lydia, in modern Turkey, and decorated on one side with a hand punched design of lion’s head (complete with “nose wart”) the coin represents a way of conducting financial transactions that have remained unchanged for millennia.


We don’t carry electrum coins today, but the dimes and nickel, euros or yuan that jangle around in our pockets are little different to those early coins. They might be neater in shape, harder to forge, and decorated on both sides (as well as along the rim) but the technology itself is fundamentally the same. A visitor from seventh century BC Lydia might be impressed at the accuracy and shininess of a quarter but he’d have no questions about what it was for.


Coins have always represented value and they have always been accepted in exchange for goods or services. It’s a much easier way of conducting trade than trying to pay a bus driver with an armful of chickens. That simplicity is why cash has survived unchanged, except in the design of its notes and coins, for thousands of years.

Chapters - Fintech

Over the last several years we’ve seen investments in fintech skyrocket from just $3 billion to over $40 billion in 2015. It’s easy to understand why. Fintech is everywhere these days and has disrupted industries involved with payments, finance, insurance, and customer service.

As we become accustomed to the term, and fintech becomes more attainable and explainable, it won’t seem foreign. People were so suspicious about credit cards when they first came out.

Don’t expect the fintech revolution to slow any time soon. In fact, here’s what the current state of fintech looks like and what we can except in the coming years.
Automation Will Come to Rule

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Automation Will Come to Rule

Automation isn’t exactly new. Over the last couple of years we’ve been able to automate everything from billing to customer service. However, thanks to technology, automation will enhance the financial industry so much that it can no longer be ignored.


“Chatbots are not new,” writes David Horton, head of innovation at Synechron.“But for the financial industry, chatbots are top of mind when looking to reinvent the customer experience while also cutting down on costs in job roles ripe for automation.” For example, banks like Santander and Bank of America are planning to use chatbots to create one-to-one conversations with their customers in 2017.

“In one chat, banks can help someone onboard or even aid a customer with an important financial decision, such as applying for a mortgage,” Horton adds. “By combining hands-on service with some element of automation — alert notifications and auto-dialers, for example — financial institutions can manage customer relationships a little easier and with a degree of personalization.”

Advanced machine learning.

According to Horton, artificial intelligence (AI) is “the brain behind the bot. It is what is enabling the disruption of traditional customer service in the financial industry.” In fact, Horton states that AI “will be at the heart of a convergence of technologies like data science, internet of things, optical character recognition, natural language programming and blockchain — all of which will drive structural change in financial services.”

With AI customers will have “a more frictionless experience”. For instance, they can upload documents using their smartphone and have the data extracted. This is done so that a credit decision can be made quickly, and without loads of paperwork.

However, Horton predicts that AI will have a profound impact on wealth management. “Throughout the year, expect the industry to launch a range of robo-advisory services — some will have a simple focus on the end-goal and are ideal for individuals who don’t care or don’t want to learn about the details of investing.”

The open API network.

“As banking services move toward an environment that is fast and agile, runs in the cloud, and expedites the customer acquisition process, many firms will begin to launch their own app marketplaces through open application programming interface modules in 2017,” says Horton.

Over the last year many organizations, such as Citigroup and BBVA, have launched their “open, unified solutions. These make it possible to deliver new digital products and services while increasing channel efficiency and reducing operating costs.”

Invoicing on cruise control.

Invoicing can be cumbersome and time-consuming, but thanks to automation, this will be a burden of the past.

“While digitization solutions have been around for 30 years old, the next generation of solutions are now here – think invoice automation on steroids,” says Nilay Banker, founder and CEO of Inspyrus.“In 2017, we will see real change and real innovation as enterprises begin to embrace Fintech concepts that take a fundamentally new approach to invoice automation that break away from legacy operations that are truly disruptive, as opposed to solutions that merely collect, image, and upload invoices to ERP or other back-office systems.”

Collaboration Between Fintech, Banks, and Regulators

Collaboration Between Fintech, Banks, and Regulators

After conducting of a survey of 265 respondents, IDC Financial Insights found that “34 percent of banks are open to collaboration with a FinTech company while 25 percent would consider an acquisition.”

Why? Because, as Rob Hetherington, the global head of the Financial Services Industries organization of SAP, explains, “Banks are in the midst of digital transformation, looking for ways to speed their time to market and to deliver new value or services to customers. Start-ups on the other hand are mobile, agile and built solely for the customer, yet they lack the regulatory know-how and customer confidence that large, global banks have.”

We’ve seen this over the last couple of years with JPMorgan working with fintechs, and European banks investing in Savedo.

Even regulating bodies on-board. For example, the Office of the Comptroller of the Currency (OCC), promote greater collaboration between banks and fintech startups. They also want to work more closely with other U.S. regulators, in order to establish rules and guidelines.

“Collaboration is key to the democratization of finance,” said Jon Jones, President at Trulioo. “Fintechs, traditional and challenger banks, and regulators need to work together to deliver what customers want safely and securely.”


Heading Towards a Contactless World

Don Mal, CEO of Vena Solutions, made a bold prediction. He predicts that when we leave the home, we’ll no longer have to bring along any credit and debit cards. “Consumer shopping habits are progressing such that having your phone is more important than your physical wallet,” he says.

“With contactless cards expected to double worldwide by 2021 (ABI Research), 2017 will be the year people begin to ditch the wallet as merchants start to standardize the acceptance of contactless digitized within mobile wallets and create incentives to pay this way, downloadable directly to your device.”

While that’s good for customers and merchants, it could have potentially damaging effects on financial institutions. This damage is because contactless payments have the ability to reduce, or eliminate, interest rates overdraft fees.

Blockchain Adoption on the Rise

We expect to see blockchain technology finally be embraced by more organizations in 2017. This technology, which is simply a decentralized database that is made-up of “blocks”. Blocks are linked to each other in a data chain, and is considered tamper-proof because it removes third-party verification.

According to a report released by McKinsey & Co., it’s expected there are going to more than 100 blockchain solutions appearing this year alone, with the banking industry spending up to $400 million by 2019.

“Existing systems within financial institutions need to adapt to the blockchain element. It must fit in with other banking systems (such as KYC, AML, customer record and other record systems, data warehouses etc.),” writes Carlo R.W. De Meijer, an independent economist. “Integration will not be limited to just installing blockchain technology within their own organization. It will mean getting many other organizations to adopt and integrate their existing systems with the new technology. This process may take several years.”

The blockchain also has the potential to assist emerging markets in Africa and India by making them financially inclusive.

Blockchain adoption Overseas

“Africa and India have seen a dramatic inflow of Fintech investment. Blockchain technology, made popular by the birth of Bitcoin, will be front and center in this initiative due to their P2P model. More and more businesses have found reasons they need the Blockchain,” writes Eric Estevez in Due’s “Your 2017 Fintech Guide.”

“P2P will help bypass traditional methods of banking and trust measures. This can produce regulatory challenges, of which Fintech is no stranger to. It’s actually birthed an industry called Regtech, which is being touted as “The New Fintech.”

Estevez ponders, “We can only wonder what happens when currency flows into villages with no running water or electricity. Cell phone technology spread quickly to these parts of the world, which can be a glimpse into the future of financial technology.”

Continued Security Improvements

With the number of  security breaches that have taken place recently, it’s no surprise that we’re turning to fintech. Especially, as mobile payments become more common between merchants and their customers.

“As hacks become more prevalent and consumer data more precious, security has morphed into a multi-step process of something you know and something you have,” says Robert McMillon, vice president of product security for point-of-sale solutions provider Verifone. “Now, as biometric technology begins to take hold, with fingerprints unlocking phones, the way of how we identify ourselves for payments and transactions will start to morph into something you have and something you are with a biometric imprint (fingerprint, facial recognition, iris scan).”

Every Day On-Demand

“A new level of demand will take hold of the industry in 2017,” anticipates Scott Blum, Vice President and Lead Business Development, Marketing, and Integrated Payments at Total Merchant Services. “Two-day or even next-day shipping for online purchases is becoming too slow for today’s consumers who want instant – or near instant – gratification.”

We’re already witnessing this “on-demand” economy with retailers offering digital wallets, like Walmart Pay, but “related technologies will improve this process in 2017.” Blume states that, “consumers unwilling to wait in long lines will increasingly opt to use their smartphones to purchase products (or ‘order ahead’) before they even go to a store or while they are on their way.” Thanks to location tracking, which are connected to smartphones, retailers can be notified whenever a customer is in proximity so that their purchase is ready to be picked-up.

In other words, customers expect immediate services. And, the fintech indsutry will play a major role in achieving customer satisfaction.


The Future of Fintech

The fintech industry is focused on making our lives easier. And, for many of us, that’s already become a reality. Eventually, more and more individuals will also become aware of this fact and will embrace the benefits of fintech.

While fintech does present numerous benefits, there are also challenges that need to be overcome. Some include such stringent regulation, and meeting the various needs of customers.

Fortunately, the fintech industry is up for the challenge and will focus on bringing this technology to the masses.

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