The Powerful Social and Economic Impact of Modern FinTech

Husan Ravshanov, American University of Central Asia

Emergence of FinTech

As we all probably know, there have been rapid changes in the financial industry following Great Depression, and the more recent one – The Economic Crisis in 2008. And it may actually have facilitated the creation of the financial technology industry, as can be seen in numbers:

  • 64% of consumers worldwide have used at least one fintech platform in 2021, up from 33% in 2017, and it is only increasing day by day.
  • Goldman Sachs estimates that fintech may eventually disrupt upwards of US$4.7 trillions of revenue that traditional financial services make.

Now that the industry is only getting off, we can agree that it is easily the hottest industry today in regards to short, mid and long-term growth potential.

Social Implications of FinTech

Wider Accessibility

Although FinTech firms are mostly present in developed nations, they can also practically be found in all corners of the world. Fintech companies in the Global North tend to focus on traditional banking services such as money transfers, insurance and online banking, which are already offered by regular financial entities. Those in the Global South, on the other hand, focus on serving the underbanked. They tend to provide microfinance, payments and crowdfunding services. In many cases, FinTech companies operating in developing nations grant access to financial services to its users for the very first time. This has made them particularly appealing to countries in Africa, Asia and Latin America, and can therefore be found primarily in these continents.

Fairer and More Transparent

FinTech is evolving and supporting our economy and society by creating fairer, more transparent and more inclusive financial services. Some of the opportunities that FinTech presents to the society are better financial inclusion, movement of talent, and diversity in workforce. Even though we still don’t have full financial inclusion, I hope that cloud-based technology will help to transform financial services and facilitate the ability to provide current accounts to the currently unbanked.

Mobility

The ability to perform any financial task with a smartphone and mobile app has shaped the user experience of banking. It’s important that the two world’s meet, so modern business can be accomplished. Payment service companies are leading this brigade.

  • This year, 90% of users will make a mobile payment with their smartphone.
  • By the year 2022, mobile transactions are projected to grow by 121%. This will eventually comprise 88% of all banking transactions.
  • Consumer spending in an app store is projected to increase by 92% to $157 billion worldwide in 2022.
  • By the year 2022, almost 78% of the United States millennial population will become digital banking users.
  • The use of cash at all point of sales has dropped by 42% since 2019 and is projected to be the least-used payment method within four years.

Downsides

Although FinTech may seems an optimal option, we also need to consider the downsides. First, it comes with a huge price tag. Finance apps with basic features, including account creation, account data aggregation, credit utilization, and budget tracker, will cost around $25000-$35000. If you want to include advanced features like tracking credit score in real-time, EMI calculator, data analytics needs more budget than estimated. Second, as James O’Riordan, Head of Financial Services at Deloitte, put it – technologies such as AI, robotics and cognitive automation are going to pose major challenges to the workforce and businesses will need to ensure these technologies are used in a way that truly augments, rather than diminishes or overwhelms, today’s workforce. This, in turn poses the question – how do you describe to a computer what fair means anyway?

Conclusion

The issue of talent is a vital one, and the question of how best to grant FinTechs access to a highly-skilled workforce was explored by a number of speakers. As Lawrence put it, “you cannot win championships without world-class players”. He believes that the UK has the blueprint for the best FinTech ecosystem in the world because of its talent and leadership.

FinTechs, therefore, have the opportunity to progress society both through job creation and financial inclusion, providing social and economic opportunities for the UK and the global economy. FinTechs are also driving competition, giving consumers greater choice and answering customer needs through technology-enabled innovation.

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