Fintech 101

When fintech investors from Silicon Valley started to remark that London is the center of the financial technology universe, this was a strong signal for me that that something of real value was a foot for Brits in tech.  Even those who have never heard of Facebook will be directly affected and the chances are it going to continue revolutionising the way we think about money, by driving efficiency and creating new markets. Fintech is evolving far beyond exchanging cash for plastic cards.

At ground level there is significant change.  It’s not just large brand names who can now store your card numbers for repeat one click purchases.  Stripe now offers this function to anyone selling online. With Apple Pay and contactless payment points less effort is required to make and receive payments.  For those still needing to get physical, SquaredUp has managed to produce a system where an iPhone can swipe card payments which is something mobile has been waiting for and is now a reality.

What’s good for you is also good for others.  In the US 23% of transactions by value are made in cash.  Those who unable to open a bank account can use services like PayNearMe.  They enable consumers to pay for things available online by paying with cash at any of the 17,000 participating stores.  FinTech company Kifiya based in Africa offers a branchless banking service.  They enable unbanked customers to send and receive money.  The system is accessed via a registered card or biometric data.

Where the idea of money itself starts to become more abstract are virtual currencies.  The likes of Bitcoin have created a digital currency dispensing with banks all together.  The two major advantages of using Bitcoin are ease of payment and very low fees.  If you want to transfer funds quicker and cheaper than before take a look at this.  A word of warning, this digital currency is in its infancy and still high risk.  Some argue that they are not currencies at all, but the mere fact that consumers are buying goods from their local shopping centres with Bitcoin highlights the potential of what high levels of FinTech convergence can offer.  Paradoxically where fintech takes it’s boldest steps forward are also where there are distinct connections to our most primitive ways of trading.  Bartering from peer to peer is at the core of the crowdfunding model where value is agreed upon within self selected communities.

 

 

The recurring theme here is increased connectivity and the efficiency in which things can be done.  Fintech goes all the way up the food chain.  The buying and selling in the world stock exchanges is now mostly done digitally.  The days of high energy trading pits with people trading face to face is now history.  Even the decisions to buy or sell are now automated.  The human element is distancing itself from the actual deals.  Analysts look at data and algorithms are programmed to make huge amounts of trades per day on behalf of their creators.  High Frequency Trading (HFT) takes advantage of situations that only last for microseconds, which would be otherwise impossible to capitalise on without cutting edge financial technology.

Venture Capital firms are buying up young fintech start-ups and practitioners say small London start-ups are seeing the lion’s share of that money. This is where the playing field is levelled in what some would consider an elitist club. It is not just technical convergence that is making all this possible.  The financial services sector is now becoming more reliant on tech. Where these two worlds collide is where digital development will see accelerated growth.

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