Fintech of the Future: Can it Make a Difference?
Entrepreneur Country published Rajesh’s piece looking at how Fintech can make a social, global difference in the world today. Entrepreneur Country has a readership of over 130,000 entrepreneurs monthly.
Communication, relationships, charity, investment, trade: the digital revolution is not just defining, it is transforming our contemporary world. And recently developed fintech (financial technology) is also changing the way that we handle money, revealing that there are better and fairer ways to do business.
shutterstock 180351068For example, growing up in India, I knew an old woman. She lived nearby and carried a basket on her head as she went around people’s homes selling vegetables day-after-day.
When you asked her why she did this every day, she would say that she couldn’t actually afford the vegetables – she had to borrow money from a local loan shark just to buy her stock. The rate was ridiculously high and she had to pay a portion of it back every day, but, because the rate was so high she could never paid off the original loan.
Today, that old woman could have funded her original loan through a peer-to-peer lending platform. In an arrangement founded on trust and collaboration, she would not have been left in the grip of a local loan shark.
Fintech could have done this, but thirty years ago it did not exist.
Through smart technology, online and apps, fintech companies are establishing financial platforms that are fast, safe, efficient and independent of those infamous financial traps or scandalous banking fees. Radically altering the way that we bank, fund, trade stocks, lend money, invest money and transfer money, it is disrupting some of the oldest established fiscal traditions, not to mention the incumbent entities that have both history and a bricks-and-mortar presence on the high street.
Fintech has been updating the financial system for the past decade, booting for change across the industry. In the past few months, crowdfunding, bitcoins (virtual currency), and new approaches to money transfers have all become relatively common features in business news, not least because of the influx in incubators and innovators within Britain’s ‘Silicon Roundabout’.
In fact, the brilliance of fintech is that it means we do not merely disrupt the current system, but enable the people who use it. And at least some of that development has the potential to do great things around the world, to allow good initiatives to be more probable, more doable.
This is particularly evident in the developing world. Consider the fact that $7bn was lost in remittance fees to African nations in 2012. Labelled ‘unethically expensive’, it is indicative of a trend in remittance practice around the world, and whilst Koffi Annan applied the ‘super racket’ only to Africa, the entire developing world suffers the same extortionate losses.
Think of it another way. The remittance industry takes far more than it needs to in profit. If it was a single economy represented by the World Bank, it would be bigger than Iran or Argentina.
It is a problem only solved by transparency and fairness. For the remittance industry, online systems make the money transfer system feels safer, faster, stronger than the transfer systems that were once in place. But banks typically charge a 5 per cent fee when transferring money, which is why many fintech companies are reducing this fee by 90 per cent, charging between 0.3 per cent and 1 per cent. They realise that today’s technology undermines the antiquated systems that have been in place since the beginnings of the gold standard.
Hence, we have launched Xendpay’s new ‘Pay What You Want’ platform that removes compulsory fees for bank-to-bank transfers.
Inspired by Wikipedia’s free, collaborative approach to knowledge, our fintech enables us to truly engage with the vital social issue at the heart sending money abroad. Consider the effect it has on developing nations: cut prices by just 5 per cent, and it is possible to save up to $16bn a year in the developing world.
By making the system free, by giving the choice back to the consumer as to whether or not they ‘tip’ for the service, Xendpay should save developing nations around £60,000,000 in five years.
Fintech gives everyone the ability to truly work towards that common good, not just us.
Now, it is about more than disrupting the status quo or augmenting convenience like every startup aspires to do. But it also accentuates that technology can be used as a cultural, social resource with the power to connect people and enable them, not alienate them and enslave them.
I believe that like the technology companies lauded for their ability to enhance the social good, fintech has just as much latent potential.
Yes, financial technology can make a difference. Because whilst it is a medium, a tool, like any good tool, what you do with it is more important than having it.