Introduction to Fin-Tech
Compared to the impacts of technology on other industries, the integration of financial services with technology has presented opportunities for disruptors in the field of finance. Fin-Tech has been currently used as the primary service including cryptocurrency on blockchains, Uber on transportation, PayPal and M-Pesa on payment modes and Airbnb on holiday accommodation. Besides, Fin-Tech has implications on money lending industry where conventional offline lending from creditors has shifted to P2P online lending as well as the emerging supply chain financing. Also , there has been the establishment of more start-ups such as Nutmeg that target wealth management opportunities specifically to provide financial services to ordinary people. Currently, individuals are using Fin-Tech in financial market analysis such as forex and stock trading where software and applications integrated with financial features have been developed to facilitate the process ( Grennan & Michaely, 2018) . With the increased use of Fin-Tech, conventional banks are forced to adapt to this emerging trend by offering digital or mobile banking services.
Key Drivers of Fin-Tech
According to Claessens, Frost, Turner, and Zhu (2018) , there are more than 2 billion adults globally without a bank account or access to a formal financial need. Although this may not be a serious problem particularly in developed countries, it has triggered the current financial market inefficiency due to high agency costs incurred while paying financial intermediaries. As such, Fin-Tech is acting as a complementary business model to that of conventional banks and insurance companies by bridging the gap between demand and supply with Fin-Tech companies offering online and mobile services thereby increasing global financial inclusion. Due to changing customer behavior, individuals have improved their embracement of new technologies in various aspects of their livelihoods particularly to take more financial risks as well as take advantage of real-time offerings and individualized services. These trends have resulted in the booming of Fin-Tech industry.
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Benefits of Fin-Tech
Frame et al. (2018) assert that Fin-Tech users benefit from the opportunities presented by Fin-Tech as well as auxiliary benefits it comes with such as advancing their financial literacy and technical learning. Besides, Fin-Tech has also favored the Fin-Tech companies since they can now perform behavioral analysis of the customers considering all the transaction history remains in the system and can be used to analyze the social, financial and personal behaviors of the customers. Moreover, Grennan and Michaely (2018) confirm that Fin-Tech has facilitated financial analysis through the analysis of transaction size, repayment trend, payment frequency, transaction volume, and lending and loaning history to determine various financial positions. Fin-Tech has significantly enhanced reliability in financial projections such as expenditures, cost control, revenues, and other calculations. Finally, online lending and banking, as well as local and international remittances, account transfers, and funds transfers, have been made possible and convenient through Fin-Tech.
Issues and Concerns
Despite the many advantages associated with Fin-Tech, there are concerns related to its implementation in the finance industry. Grennan and Michaely (2018)claim that a lthough there is a rise in demand for technology-related talent more people in the finance sector are facing risks of losing their job from retrenchment due to decreased number of bank branches and automation of majority of operating processes. According to Pejkovska (2018) , 30 percent of the people’s job will be replaced by AI in the next five years s ince the Fin-Tech industry is evolving more rapidly than the regulation and policies, it spurs concerns on lack of surveillance. Besides, the fact most governments are adopting favorable policies with low entries to attract investors and foster development, malicious entrants such as Ezubao from China can abuse this leniency through exploiting the advantage to conduct deception and fraud ( Claessens, Frost, Turner, & Zhu, 2018) . Finally, the ethical argument on AI still insists that robotics is catching up with humans at a faster pace because they can teach themselves through machine learning situating the well-fare of the entire human race at risk (Frame et al., 2018).
Conclusion
In conclusion, Fin-Tech is a chance for industry incumbents to take bold steps and engage with emerging trends. Although Fin-Tech was initially materialized to serve as a complementary for conventional banking model to help unbanked population from remote areas, nowadays it has become an integral part of the financial sector. As such, it is driving radical changes and increased growth in insurance, e-payment, wealth management, financial market, and lending institutions. However, it is important to maintain a balance between the extent of technology applied at the expense of human well-being and achievements ( Pejkovska, 2018) .
References
Claessens, S., Frost, J., Turner, G., & Zhu, F. (2018). Fintech credit markets around the world : size, drivers and policy issues.
Frame, W. S., Wall, L. D., White, L. J., Berger, A., Molyneux, P., & Wilson, J. O. (2018). Technological Change and Financial Innovation in Banking: Some Implications for Fintech (No. 2018-11). Federal Reserve Bank of Atlanta.
Grennan, J. P., & Michaely, R. (2018). FinTechs and the Market for Financial Analysis.
Pejkovska, M. (2018). Potential negative effects of Fintech on the financial services sector. Examples from the European Union, India and the United States of America.
