Why fintech will change the world

Rosalind Tan is a fintech startup scout with Techlist and a consultant with Wavemaker Pacific.

Fintech is on fire. Better, it’s white hot. According to an oft-cited study released by Accenture, global investment in financial technology ventures tripled from US$928 million to US$2.97 billion between 2008 and 2013. This figure is expected to snowball to a whopping US$6 to 8 billion by 2018.

To put this within the context of the wider investment landscape, in the three years leading up to 2013, global investment in fintech grew more than four times faster than venture capital investment overall.

Here’s a quick lowdown on fintech or “financial technology” for those of us newer to the scene: broadly speaking, it describes an industry composed of companies that use technology to make financial systems more efficient.

Under this umbrella come a wide range of sub-industries: transfers and payment processing, stock and trading platforms, peer-to-peer lending, cryptocurrency – the list goes on. Diverse as they come, fintech startups share one trait: they seek to provide innovative technological solutions to enhance the efficiancy of the financial system and the individuals involved in it.

Believe the hype

Fintech is no longer the exclusive property of tech geeks and libertarian revolutionists. In recent years, the term has become a buzzword in mainstream media and investor circles. From the BBC to The Straits Times in Singapore, major newspapers the world over have started running articles on the latest developments in the industry and their politico-economic implications.

A growing number of investors whose portfolios previously contained no fintech exposure are now positioning themselves for a share of the action – no one, it seems, wants to miss catching the next big wave.

So what is all the fuss about and why should we believe the hype?

First, the financial crisis of 2008 left banks pumping their resources into new policies to satisfy regulators and unable to spend money on innovation. This has provided a huge market for smaller companies to create innovative products that provide growth and big data solutions to financial institutions. Startups like Moneythor build products that enable their clients to enhance their customers’ digital banking experience and better understand their financial behavior through an engine that collects and analyses their transaction data.

Such startups are more often than not headquartered in Singapore which, as an established financial centre at the forefront of technology, has become a hotspot for fintech developers looking to corner the Asian market.

The technology that is being developed within the fintech industry has implications beyond the financial world. The blockchain technology pioneered by the inventors of Bitcoin enables Internet users, for the first time ever, to transfer unique pieces of digital property to each other in such a way that the transfer is guaranteed to be safe and secure. Everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer. This is a big deal.

As legendary venture capitalist Marc Andreessen points out, it could potentially eliminate the need for any sort of third party – be it a bank or a governmental agency – to guarantee the exchange of any sort of digital or physical asset. The idea is that this would cut out middle man costs and vastly increase the financial autonomy of individuals.