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The ecosystem of global fintech continues to grow actively, from blockchain technology to mobile wallets, as the capital market has poured huge investments into the fintech startup sector. While most fintech entrepreneurs are dominated by western countries historically, Asia’s fintech landscape is developing differently in last five years by four factors.

1. Geographic Fragmentation.

Countries with small market need to obtain license to do business in diverse foreign markets.

2. Growing Consumer Class.

The middle consumer class is growing and E-commerce retailers is guiding customers to go cashless.

3. Unbanked Populations.

50% of the un-banked are in Asia. Cash payment is still common in used because of not having enough money to deposit after living consumption, high flexibility to use in rural areas, and lack of trust in banks.

4. Mobile penetration.

The mobile phone penetration rate in India has reached to 80% and 99% in Indonesia. However, consumer credit reference is still relatively new to the financial markets in Asia. Data is recorded on the mobile devices, but how to utilize existing data to predict creditworthiness is an opportunity and challenge for fintech companies.

 

Source:

http://www.forbes.com/sites/falgunidesai/2016/04/29/asias-fintech-potential/#3fd37b7d72a3

 

Advancement in fintech has led conglomeration of financial industry with digital industry like never before. But while merger of two worlds helped broadening the reach, flexibility, and level of innovation to finance industry, this also bought along the bad side, i.e. cybersecurity. To give a perspective, just a year ago, in 2015 there was a cybersecurity attack ‘JP Morgan hack’, which is considered to be ‘the largest theft of customer data from a U.S. financial institution in history’. Incidents like such proves that there is a constant need to improve and enhance cybersecurity.

Hacks, security breaches, and a lack of trust by consumers is becoming commonplace. The need for new solutions is becoming more obvious, and IT and fintech security budgets across the private and public sectors are increasing accordingly. As a result, cyber security has become the fastest-growing sector in IT. The global spending for cyber security was nearing $76.1 billion in 2015—and that number is expected to rise to $170 billion by 2020(Source: Gartner).

The last thing any financial institute wants is to become the victim of a crime. The result could be a massive loss of customers, a damaged brand reputation, and legal and financial liabilities that may be impossible to recover from.

 

(reference: https://centricdigital.com/blog/fintech/is-your-data-safe-fintech-security-challenges-and-solutions/)

The White House FinTech Summit has finally published a whitepaper, A Framework for FinTech, on this Friday, January 13th, 2017, aiming to develop a policy framework for regulating the FinTech ecosystem and to encourage public-private collaboration in the FinTech industry.

This is the first time the U.S. government, engaged with stakeholders across the country, published its regulation principles in the industry. The Framework including 10 principles that encourage stakeholders to:

“1. think broadly about the financial ecosystem;

2. start with the consumer in mind;

3. promote safe financial inclusion and financial health;

4. recognize and overcome potential technological bias;

5. maximize transparency;

6. strive for interoperability and harmonize technical standards;

7. build in cybersecurity, data security, and privacy protections from the start;

8. increase efficiency and effectiveness in financial infrastructure;

9. protect financial stability; and

10. continue and strengthen cross-sector engagement.”

The publish of this Framework shows that, first, the U.S. government rates highly on the rapid growing FinTech industry, and second, the government begins to make great effort in regulating the industry. The Framework also illustrates the right approaches to ensure the promising growth of FinTech in the near future as forecasted p by scholars and regulators.

Source: https://www.whitehouse.gov/blog/2017/01/13/framework-fintech

The article, “Verifone, FIS and Modo are creating a new way for consumers to pay with loyalty points” by TechCrunch talks about how their new system will allow customers to pay for products and services with their loyalty points at locations that offer them. While this is a great way to use an existing service in a new way, I do not believe that it will be that wildly adopted. First of all, the pay with your loyalty software application has to be enabled by the merchant. Some merchants might not enable it based off of the belief that it is too much trouble. Another issue is that in order for the merchants to use this software application, they will need to have a specific Verifone credit card terminal. Hopefully there are a lot of terminals that can use this application because purchasing a new terminal just for this application while the old terminals are still working will be a very big roadblock. The idea is great, but until a more detailed plan is given, I cannot see this service being used by merchants and customers.

Verifone, FIS and Modo are creating a new way for consumers to pay with loyalty points

 

Market penetration of supply-chain management is only at 10% globally according to McKinsey, and only 30% of businesses worldwide have supply-chain financing computing according to Deloitte. Prevalently in the world, there is a lag between payment to buyers from suppliers, which was due to the financial crisis in the 1990s as companies tried to stretch internal resources. Supply-chain management can help improve the cashflow between suppliers and buyers by making payments fast and convenient for buyers.  Fortunately, companies are realizing these benefits, and supply-chain financing is growing. Fintech firms are driving this growth due to the ease of the platforms they offer.

Fintech firms are shortening payments by paying sellers on behalf of buyers. Once a buyer approves of an invoice, it is sent to the fintech lender, who then pays the supplier at the agreed date. The fintech lenders are also able to pay buyers on a earlier date less a discount, which are minute due to low interest rates, short financing periods, and risks only associated with the market. Although banks offer this kind of financing, fintech firms are able to help out smaller businesses, meeting the need of the growing market.

How Fintech Firms are Helping to Revolutionize Supply-Chain Management 

Healthcare delivery is accompanied by a series of complicated financial transactions between the patient, provider, and insurance companies. Currently, most of these transactions are done manually, involving extensive labor hours conducting phone calls, and mailing and faxing documents. In particular, claim attachments, which providers use to give additional information required for certain claims, take up a significant amount of additional time. In total, these tasks are estimated to take up to 1.1 million unnecessary labor hours (Lagasse).

However, this does not have to be the case. New findings show that switching over to electronic transactions through a financial information system could potentially save $9 billion through an average savings of $6 per claim (Lagasse). Evolving industry standards and advances in technology have likely contributed to greater adoption, but many processes remain to be performed manually. Dental providers could potentially see even more benefits, as they tend to adopt electronic systems at a 30% lower rate than medical providers (Lagasse). Ultimately, healthcare payments are relevant to most people and should be performed in an efficient manner. Adoption of financial information systems would show significant cost savings in the healthcare delivery industry.

Source: http://www.healthcarefinancenews.com/news/electronic-business-transactions-switchover-could-save-healthcare-9-billion-report-says

Algorithms is now playing a crucial rule in innovating the Fintech industry. Nowadays, Fintech startups are implementing new technologies to provide low-cost financial services. LeadingRobot recently launched an automated hedge fund using blockchain technology. The automated hedge fund buys credits from online lenders and move investors funds based on risk tolerance and investment horizon. Unlike traditional hedge fund firms that charge a certain performance fee and management fee, LendingRobot only charges a 1% management fee and no performance fee.

Clearly, new technologies enable Fintech startups to disrupt traditional banking and financial service industry. At the same times, new technologies allow customers from different financial situations to manage their money at a very low cost comparing to traditional financial services.  Despite some risks related to new regulatory agenda and managerial changes within the startups, companies providing Robo-advisors or automated hedge fund services have highly chance to succeed. In particular, millennials tend to adopt these new Fintech services because they provide lower cost for more people and are easy to use as mobile phone apps. Moreover, a high mobile penetration rate in the US provides a large group of audience for Fintech startups.

 

Fintech Startup LendingRobot Uses Blockchain To Launch Automated Hedge Fund

Out of the ashes of the banking meltdown, small financial technology startups sprung up in their places. Since 2008, one of the biggest fintech startups to succeed is Venmo. Venmo is an app based peer to peer transaction app. The race to dominate the mobile transaction market has been a competitive race for the last 10 years, however, Venmo has proved to be the victor in the market with over 2.1 billion dollars transacted every quarter.

Many people have wondered how Venmo won the race for an everyday p2p transaction app when the market has been so competitive for so long. The answer lies in multiple variables. Venmo was the only app that required users to sign in through Facebook. This helped Venmo secure a large millennial user base while helping users process transactions quicker with their Facebook friends already being linked to their Venmo account. Another crucial factor to Venmo’s success was their timing. In 2010, mobile pentration in the US had surpassed 75% of the population. People felt more comfortable using mobile application to handle sensitive tasks such as the exchanging of money. The culmination of these factors led Venmo to win the P2P transaction market.

How Venmo Won In One Of The Most Crowded Spaces In Tech

India’s government is in the process of universalizing its Public Financial Management System. The goal of a universal system is an efficient digital system to replace its manual one. This large-scale information system will be run by India’s Department of Expenditure instead of individual states.

The individual states and union territories are hesitant to accept this transition because they view the change as a loss of control and independence. They do not feel that the Department of Expenditure has the right to interfere with the workings of state governments.

Overall, I can understand the states and union territories’ trepidation with the roll-out of a universal financial information system. Joining a larger system increases oversight and scrutiny which may imply that the government doesn’t trust its states. However, I think that the states should embrace this system because it will increase efficiency and transparency.

With India’s twenty-nine states, seven union territories, and over 1.2 billion people, there are vast amounts of financial information to track and manage. State treasury departments must communicate with both Parliament and local ministries. A single, uniform system will allow transaction details to be more accessible and understandable. The increased accessibility can help fraud detection as well.

http://economictimes.indiatimes.com/news/economy/policy/government-to-universalise-the-use-of-public-financial-management-system/articleshow/53231185.cms

http://economictimes.indiatimes.com/news/economy/policy/march-deadline-set-to-integrate-states/uts-to-public-financial-management-system/articleshow/53835598.cms