Since 2009, in the period we call Fintech 3.0, new enterprises and technology, e-commerce, and social media companies have begun to offer financial products and services directly to the public as well as to businesses, including banks. Such growth of FinTech is attributable to a bottom-up movement driven by tech firms and startups. At that point, Fintech ecosystem has been broadened by the developed economies such as the US and China, perhaps Japan and Singapore. However, today, we can talk about developing economies such as the African countries as the new actors in the Fintech landscape with the help of their digitalization at an accelerated rate. And, it can be fairly said that by the evolutions of digital banking practices through the developments in Big Data, Artificial Intelligence (AI) and machine learning, FinTech will intensely continue its upward tear over the next decade.
So, the question is as follows; Are we going to the new Fintech era?
First, on the one hand, it is known that the US has been evolving in Fintech over the course of 2018 at a high pace. The recent trends are mostly seen in insurance technology, digital investment management, digital lending, mobile payments, and digital banking in the US. As one of the fintech segments being salient in recent times, in particular, from a funding standpoint, we can talk about the insurtech in which many companies have started to take place in various partnerships. Furthermore, partnerships are increasingly preferred in the sector of digital investment management through digital lenders who have actively sought partners. In such fintech segments, new innovative technologies are licensed by some startups to deep-pocketed financial institutions. Such a software-as-a-service business model has started to be embraced as a strategy over 2018.
On the other hand, it cannot be mostly realized that the countries in the Asia-Pacific and Africa region have also been promising with regards to the future of the FinTech sector at a faster rate. So, how can we understand the global evolution of fintech sector in the new digital era? To give a satisfactory answer to that question, first, let’s take a look at the main developments in the FinTechs of African countries:
Telecommunications companies have led FinTech development in Africa by some factors. One of them is the rapid uptake of mobile telephones as a partial solution to the underdeveloped products and services of the traditional banking industry. For example, in Kenya and Tanzania, with the help of e-money recorded on smartphones, basic transactions, and savings services have been quite successful. Mobile payment applications have contributed to economic growth by enabling customers to securely save and transfer funds, pay bills, and receive government payments. M-Pesa that was launched in 2007, can be regarded as a success story of Africa in that sense.
Looking at these developments, it is not surprising to witness the nascent roar of African countries alongside the FinTech “dragons” in the West and Asia. At that point, it can be said that another forerunner in the FinTech sector is unsurprisingly China.
Its triumph can be mainly explained by its incredibly rapid digitization, increasing entrepreneurial e-commerce activities, and rising social media ecosystem as opposed to its poorly prepared incumbent financial institutions. For example, a technology company. Ant Financial in China has grown to 450 million users and led with a market share of USD 60 billion since it was spun off from the e-commerce giant Alibaba in 2014. As an electronic, phone-based wallet, Ant Financial has served other financial business services by dominating the majority of online payments in China since it can offer online loans, insurance, and investment advice to Chinese customers.
Secondly, Fintech Venture Capital (VC) in China funds many health insurance company with the help of Big Data and Internet of Things (IoT) without ignoring the issues of ‘distribution efficiency’ and ‘user experience’ in the context of Business-to-
Consumer (B2C). Thus, we can properly maintain that as Fintech expands, serving the unbanked with greater financial inclusion is an ‘imperative’ for China.
Accordingly, 2019 CB Insight Report stated that;
“…Asia saw the biggest boost in deals, growing 38% YOY and a record level of funding raising $22.65B across 516 deals. Political and trade war tensions may have caused some of the pullbacks in H2’18, but 2019 could see Asia overtake the US…”
Today, FinTech has increasingly shaped almost all aspects of the global financial system, with perhaps a highly dramatic impact in China, where the technology firms such as Alibaba, Baidu, and Tencent have transformed the financial landscape in Asia. China’s Because of underdeveloped banking infrastructure and high technology penetration, China has become a fertile ground for fintech sector. Fastly emerging markets, particularly in Asia and Africa, have begun to experience the new landscape that can be characterized as an era of strong Fintech development supported by deliberate government policy choices in pursuit of economic growth.
Briefly, FinTech development is facilitated through some factors. First of which is the high penetration of mobile devices (especially with broadband internet access) among the young and technologically literate. Second, we can mention the untapped market opportunities, a lack of physical banking infrastructure, and consumers increasingly valuing convenience over the trust. At the same time, the increasing number of graduates with engineering and technology degrees in China and India enable these countries to play a role in planting fintech sector.