Advancements in technology are helping to redefine almost every industry, including the financial sector. Ultimately, every company and investor wants to get to one thing: the bottom line and that question is answered in $$$$.
In a world that has few barriers for investors, money flows across traditional banking spheres, but also attracts bankers to new markets where they can improve their margins or regain their profits. Technology makes expansion in banking possible by offering new forms of banking and finance services where traditional banking falls short.
A perfect example is the exponential growth of Ant Financial, the digital payments arm of the China-based tech company, Alibaba, who gained 100 million new customers in 2016 to reach a total of 500 million customers, matching the customer base of some of the world’s biggest banks.
However, acquiring new customers is only the first step to expand business opportunities. In many other regions, it is easier to bring new financial services to a population consistently left behind by the restraints of traditional banking.
In emerging markets like Mexico, Latin America, and India, this means micro credits for businesses. The big banks increasingly have the opportunity to invest in local fintech startups which levels the ground and helps to lay the foundation for healthier markets. In the last two years, for example, nearly 30 fintech startups in Mexico raised series A and B investments. With only 27% of the Mexican population having access to traditional credit, the projected growth of the market for this type of banking is at least in the two digit stage.
Perhaps where the technology and financial worlds are quietly converging is in the automation and digitalization sectors. This could end with as much as 1.7 million jobs in the financial sector in the next decade per a Citigroup study cited at the recent World Economic Forum in Davos.
A study conducted by Business Insider this year also makes the case for using very distinct strategies for fintech startups and legacy banks as both face new challenges ahead. “Banks will have to find a way to develop new platforms while overcoming legacy infrastructure; startups will have to find a way to scale out their business while facing increased regulations, higher costs, and larger infrastructures that will be more difficult to change and manage,” according to the report.
In both cases, the government can’t throw shade at such actions as it only serves to boost or hinder the development of existing and new fintech companies. However, one thing is for sure, technology is reshaping the financial sector bit by bit.
Marco Islas for TechFunnel.com
