FinTech was rather a cool trend to watch out for in the year 2017, and going into 2018, we are looking at FinTech becoming more of a mainstream business.
A few weeks back, Coinbase announced instant purchases and remittance on transactions. Users can buy bitcoin and withdraw funds from their accounts, just like they would with a financial institution. They introduced phone support for customers. You can spend your crypto using a debit card, just like you would with a regular financial institution. Working with Shift, Coinbase users can use their bitcoin anywhere VISA is accepted. Coinbase is FDIC insured up to $250,000, just like any other financial institution.
Does it start to sound like a financial institution to you? It does to me.
In a speech by IMF head Christine Lagarde, at a Bank of England conference in September 2017, she speculated that bitcoin and cryptocurrency have as much of a future as the Internet itself. It could displace central banks, conventional banking, and challenge the monopoly of national monies. We could only wish it will all happen in due course, but the rate at which technology is changing things is rather catching us off guard. Could it be a reality in the future that we keep minimal balances for payment services on electronic wallets? The remaining balances may be kept in mutual funds, or invested in peer-to-peer lending platforms, with an edge in big data and artificial intelligence for automatic credit scoring. Could services like Coinbase, Xapo, Klarna, TenX, etc., be the financial institutions of the future?
FinTech is not just about cryptocurrencies. As I mentioned in one of my articles earlier, FinTech is the new applications, processes, products, or business models in the financial services industry, composed of one or more complementary financial services and provided as an end-to-end process via the Internet. It would consist of a number of technologies working in a synergetic way to provide a different customer experience.
Bigger financial institutions are already in the game; small and medium sized banks need to act now. It’s critical to the survival and growth of business in the medium and long term to make a formal start now to understand this phenomenon called FinTech. A first step is to get educated about what it means to your organization and raise awareness inside the organization. The next step would be to make FinTech part of your strategy discussion: What should we do? Where should we put our efforts first? There are a number of options to consider, and each organization could have a different course of action once the team understands what can be done.
It can be a daunting effort to catch-up, but a good start is half the battle won.