If you’ve ever paid for something with your
phone, transferred money using an app
or checked your bank
statement online,
then you’re already part of
a multi-billion dollar industry.
It’s called fintech, and it’s changing
economies around the world.
Fintech is short for financial technology
- seems simple, right?
Well, the term fintech includes a huge range
of products, technologies, and business models
that are changing the
financial services industry.
It refers to everything
from cashless payments,
to crowdfunding platforms, to
robo-advisors, to virtual currencies.
So every time you donate to someone’s
Kickstarter campaign - that’s fintech.
Or if you transfer money to someone
using Venmo - that’s also fintech.
And that’s just the beginning.
Here at a major fintech conference in Amsterdam,
hundreds of companies are trying to
disrupt the banking and finance industries by
changing the way we pay and borrow money.
And investors are buying it.
Global investment in the fintech sector has
added up to nearly $100 billion since 2010.
In 2017 alone, fintech
investment surged 18%.
Startups focusing on payment and lending
technologies received the majority of those funds.
It’s not just startups that
are getting into fintech.
Some of the world’s biggest companies from
Apple to Alibaba are going big on it, too.
Just think of Apple Pay or Alipay.
One reason for all
of this investment?
Consumers are adopting fintech - fast.
One out of every three people
across 20 major economies
report using at least two fintech
services in the last six months
China and India are leading the way
with more than half of consumers
using services like money transfers,
financial planning, borrowing and insurance.
Financial technology has filled a
void for people around the world
who don’t have access to
traditional banking services.
In fact, it’s estimated nearly two billion
people worldwide are without bank accounts.
Now, thanks to fintech, all you need is your
phone to take out a loan or insurance.
Take Kenya, which pioneered a mobile
banking system called M-Pesa.
Kenyans access their M-Pesa accounts
directly on their mobile phones
to transfer money, pay
bills or take out loans.
Today, an estimated 96% of
households in Kenya use M-Pesa
and one study found it has helped lift roughly 2%
of Kenyan households out of extreme poverty.
The rise of fintech has forced traditional
lenders, insurers and asset managers
to embrace new
digital technologies.
For example, wealth managers now
have to compete with robo-advisors -
which are automated
financial planning services.
I mean talk about rise
of the robots, right?
Thanks to high-tech algorithms,
these services are available 24/7
and can be more affordable
than traditional asset managers.
That helps explain why robo-advisors already
have billions of dollars under management.
Like any growing industry,
fintech isn’t without risks.
And some regulators have struggled to
keep up with the fast pace of innovation.
Think of peer-to-peer lending platforms,
where individuals borrow and lend
without going through a bank.
Compared to traditional banks, these
services might not be required to
set aside as much money in case
customers default on their loans.
This can be risky for
companies and consumers.
Data privacy is another major concern.
As more financial services go digital,
cyber attacks become a bigger risk.
The challenges facing financial technology are likely
to grow as more and more businesses go digital.
But for many of the companies and consumers
here - fintech is more than a buzzword.
It’s a big business opportunity.
Hey everyone, Elizabeth here.
Thanks so much for tuning in.
Be sure to check out more
of our videos over here
including one about blockchain and another
where I talk to a company that's going cashless.
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