Is Fintech Overrated - Or Are We Underestimating It?

Quartz recently published an interesting think piece on whether or not the fintech revolution is overhyped, or understated. I was overjoyed - at last someone was brave enough to question the genuine ‘greatness’ of the fintech revolution, and whether it really is worth all the buzz, investment and coverage in the media. 

So what if technology is changing yet another aspect of our lives - aren’t we used to it by now, what with the advent of Twitter, Tinder and Alexa having upended everything we know about society and social order? 

Disruption has occurred in virtually every industry over the past two decades, mostly thanks to technology. From education to healthcare, travel and retail, the internet - and more recently the advent of artificial intelligence, chatbots and blockchain, among other newfangled technologies - has completely transformed the way we live, eat, exercise, spend, travel, date and work. 

Apps are now capable of connecting lovers, arranging student schedules and hiring new employees, while voice assistants, augmented reality and regenerative medicine are no longer phenomenons that are limited to science fiction.

Technology has debatably been the greatest driver of change this century, having brought us the third industrial revolution through new power technologies such as steam power and electricity, and bringing us to where we are now at the dawn of the third millennium and fourth industrial revolution thanks to the emergence of the Internet.

So too has technology completely changed the way we bank. It has brought us the ‘Fintech Revolution’.

Fintech, which refers to the intersection of finance and technology that “improves and automates the delivery and use of financial services” has been hailed the single largest disruptor of the decade.

In the first three quarters of 2019, fintech startups received $24.6 billion in funding, while the sector’s leading 58 companies (including China’s Ant Financial, US-based Stripe, and Germany’s N26) are currently valued at a combined $213.5 billion.

It is all the mainstream media can talk about, and it is no wonder. A mere decade ago the concept hadn’t even materialised, or if it had, no one knew about it. 

But today it is rapidly transforming the financial services sector as we know it. Mobile banking, robo-advisors, peer-to-peer lending services, crypto and crowdfunding - they are all brought to us by fintech.

Is it because fintech is dominating the startup market that we are hearing so much about its potential? Is it because millennials are the innovators invested in fintech, as well as the authors and readers wanting to read about fintech-related complex trading strategy among other things?

Why does fintech deserve more attention than, say, the disruption of the travel industry, which is seeking to become more sustainable, or the transformation of the retail sector thanks to augmented reality?

Whatever the case, whether it be we are overexaggerating fintech’s potential or undermining it, fintech is a very, very good thing for us. It has enabled financial services to become cheaper, more convenient, and safer for all - something that desperately needed to happen.

Impact investors have hailed fintech the potential solution to financial inclusion and equality on a global scale, capable of connect off-grid villages in remote corners of the world to capital and banking opportunities for the first time ever. 

Under-banked communities traditionally suffer from poverty and exclusion from essential services, but with something as simple as an internet connection or an SMS from a mobile phone, farmers can now be included in the financial system, access banking services and receive payment easily. 

Fintech could very well lead to the next revolution in the developing world, connecting it to the developed world and enabling remote and under-banked communities to benefit from the same banking support as every other town, thereby boosting economic growth in such places.

Interestingly, fintech is most prominent in countries with less banking regulations in place, meaning sub-Saharan Africa and parts of Asia stand the chance to gain the most. 

But history is marked with society’s failure to anticipate the full extent of certain influences, ie. that of technological change. Will fintech be yet another example of this?

Are we so focused on leveraging fintech as a means of profiting that we have failed to fully appreciate what it could mean for the global economy?

No one would argue with the fact that banks are the bane of our lives. Poor customer service, complicated processes, very little in the way of trust and ridiculous fees for inadequate services have led us to “hate on” banking institutions. Let’s not even get started on the slow adoption rate of technology by banks and their Elizabethan-era style communication approach, or the fact that - despite constantly rising fees - banking security seems to be getting worse year on year.

Traditional banks are, in short, incredibly inefficient for the end user, often having clunky or non-existent user interfaces. It is about time we saw a second contender on the scene. 

However much we choose to acknowledge the power and potential of fintech, there is one thing we cannot deny.

That fintech will contribute to the betterment of society, in that it will help developing nations reach “under-banked” communities using technology and will make banking easier and more efficient for all.