The COVID-19 pandemic has sped up a lot of things—the move to FinTech, digital banking, and the digital wallet is one of them. Being able to tap a phone, rather than pay with cash or a card, means moving one step closer to a contactless world—something many retailers are aiming for these days.
The trend is going to continue to tick upward in the next several years. Recent numbers from ResearchandMarkets predict the global FinTech market will continue grow 23.58% through 2025.
This is a conversation I had on the recent Element Podcast from HPE with Brett King, host of the podcast, Breaking Banks, and cofounder and CEO of Moven, a mobile banking startup, and Delvon Jones director and chief technologist of the financial service industry at HPE.
FinTech: A Global Perspective
While there is still debate over the term FinTech, King explains the modern version is essentially a startup that was created in the digital age or internet age that is focused on disrupting financial services. He adds, last year, Chinese mobile payments, wallets, Alipay, and Tencent, WeChat Pay topped $52 trillion in mobile payments, which is more than twice the total use of plastic cards globally. He suggests in China 75% of the population uses FinTech on a daily basis as their primary day-to-day banking tool.
“The innovation that’s happening in financial services happens as a result of two primary factors. One is obviously the quality of the startups you have, the amount of funding that you have, all of those things,” King explains. “But it’s also very dependent on regulatory involvement and where the regulators see that, yeah, this is the future. We need to create this competitive landscape. We need to, you know, create these new categories of banking and support that growth. That’s the difference really between the U.S. market when it comes to mobile payments versus China, where the regulators sort of let it go.”
All about the Data
Imagine this scenario Jones gives on the podcast: On Wednesday you like to go to Cold Stone Creamery for ice cream with your fiancé. The banking institution can see both people in close proximity and can process that data, offer discounts on Wednesday morning, and find a way to monetize that data while also enhancing the user experience.
“It’s about making it more convenient for that end user,” says Jones. “The user experience is everything. The younger generations that are active now … if they don’t have a good experience, they will leave.”
With more data comes more risks and the need for heightened cybersecurity. King suggests part of the problem is that the identity infrastructure we use for the banking system is based on things like your mother’s maiden name, your date of birth, and your social security number. Those data points are no longer securable.
“We need that evolution in identity frameworks to ensure security,” he continues. “Think about how many passwords and how many usernames you have to remember for all these different services. … So the easiest way to fix that is using biometric identity.”
Jones adds, “I think from an AI (artificial intelligence) perspective, you see a lot of emphasis on ethical AI and a lot of work’s being done to drive out innate bias from a lot of the algorithms that we use. And I think the closer we move to those goals as a society, I think the fear factor of some of these, you know, facial recognition type technologies, if we are fairly confident that it will be used in an ethical manner, I think a lot of the fear will subside on that.”
FinTech and the Generations
At the same time, we have different demographics to consider here—with multiple generations in the workforce right now. Does it, then, become a question of digital inclusion? King says in the United States traditionally about 20% of households are underbanked. Looking at emerging economies brings other considerations into the discussion where “digital inclusion is going to be absolutely critical to ensure that financial inclusion is possible.”
To learn more about what is happening in the FinTech market, listen to the episode. We dive into the cloud, what the future holds, and yes even some recent stories in the space like Robinhood, Reddit, and GameStop. Give it a listen and give me your thoughts.
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