Fintech 101 : Understanding Financial Technologies

Fintech isn’t a new concept. ‘Fintech’ has in the past been referred to as, ‘a small group of modest start-ups offering limited online lending or retail-payment services’. Oh how times have changed.

Fintech 101 : Understanding Financial Technologies

Fintech isn’t a new concept. ‘Fintech’ has in the past been referred to as, ‘a small group of modest start-ups offering limited online lending or retail-payment services’. Oh how times have changed.

In less than one year (2015-16) the Fintech industry has rapidly branched out. Slowly but surely, banks are beginning to accept the global changes to the age old industry of ‘funders and borrowers’. 

National Australia Bank CEO Andrew Thorburn recently stated that, “Fintech start-ups should be respected not feared (by banks)”. This comes after years of financial institutions expressing concerns over the Fintech innovation. Some banks have even felt the pressure to partner with, or purchase a Fintech start-up.

It is apparent that we are only at the genesis of the Fintech revolution. So far, Fintech companies have offered a new twist on financial advice, visualisation, personal loans, business loans, budgeting and organising, payments and blockchains, and this is only the beginning. 

There are many more financial avenues to explore, with many changes set to overhaul the financial industry all together. The expected changes are so rapid and diverse that we can only predict how our  grandchildren will ‘bank’. And If that word will even exist in 2050. 

PWC have predicted that in years to come “banks still have advantages, but – to be part of the future they need to invest heavily, rediscover and reassert their core role in society”.

Source: Blurred lines: How FinTech is shaping Financial Services (PwC)

Many hypotheses have been made about the financial technology sector, and it’s safe to say that the rapid development can only progress with acceptance, change and support from regulators, and the government. 

According to ‘The Pulse of Fintech’, “global investment in Fintech companies totaled US$19.1 billion in 2015, with US$13.8 billion invested into VC-backed fintech companies in 2015, a 106 percent jump compared to 2014”.

The Fintech industry is never boring, as it struggles to explain its safe technology to early adaptors. Unfortunately, Fintech start-ups are still fighting for their voice as financial institution aren’t necessarily always happy to assist, as it isn’t in their ‘best’ interest.

Of course Fintech will forever be evolving, here are three current 2016 trends chosen by our own Fintech gurus.

The integration of BlockChain 

Blockchain is taking Fintech by storm. Blockchain is basically a digital ledger that keeps track of every transaction that has happened. In a Blockchain, this ledger is shared between thousands of participants globally, who verify the legitimacy of a certain transaction. Once this transaction has been verified and "hooked" onto the chain, it is extremely hard for it to be deleted or modified.

For the financial services industry this offers a large amount of potential for any transaction. It can track large amounts of investment from companies such as the ASX and PWC into start-ups. Start-ups Blockstream and Bloq have focused on the use of Blockchain for monetary transactions for any financial service. 

The Blockchain process can be applied to many other processes which will be particularly beneficial to the Fintech industry, such as smart contracts and verifications.

The partnership-driven nature of Fintech start-ups

Fintech start-ups are making one thing clear, they don’t particularly want to be bought out by banks. The current trends are seeing Fintech start-ups creating partnerships with banks. Here they are more likely to be accepted by the banks, and can get their foot in the door. 

On the other hand, banks feel more secure partnering with Fintech start-ups as the companies can recommend each stream to each other’s customers. 

One example of a great partnership is when Prospa (small to medium enterprise loan provider) entered into a partnership with Westpac in 2015, rather than simply being bought out by them.

The Rise of Docusign technologies 

Docusign technologies are growing in popularity. The digital signature software allows the whole process to be completely done online. The electronic signature is completely legal, and will hold up in any court room. 

Some Docusign companies worth mentioning include; RightSignature, GetAccept and of course ‘DocuSign’.

Tom Gonser, the founder of DocuSign, demonstrates how to capture an electronic signature. Image source

The Protogen team has been at the forefront of some of the driving forces behind the Fintech revolution. Our rich history in the high performance computing and data analytics fields, combined with a passion for digital disruption and innovation are a natural fit for the new Fintech industry. 

What do you think the future of finance holds? Would love to hear about your predictions in the comment section below.

Fintech 101 :  Understanding Financial Technologies

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Fintech 101 : Understanding Financial Technologies

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