We can all agree that this year has witnessed unprecedented levels of disruption across all industries and human activity all around, and the financial sector was at the top of them.
Banks all over the globe closed their doors, at least temporarily, experiencing slowdowns and hiccups due to the rapid spread of the Covid-19 pandemic.
During this time, however, Fintech companies stepped into the limelight and filled the gap left by traditional banking due to their online-based solutions that demand as little human contact as possible.
With this, experts from across the board expect Fintech to grow even more, since many customers who leaned on their services during the worldwide lockdown for convenience, will continue to use their services in the foreseeable future.
According to a study done by Netherlands-based accounting firm KPMG, global investment in fintech in the first half of 2018 amounted to a record US$57.9bn across 875 deals – a significant increase from the US$38.1bn invested throughout 2017.
What is Fintech?
Fintech, which is short for financial technology, is used to categorize and describe companies within the sector of mobile payments, money transfers, loans, fundraising, and asset management.
“Global investment in Fintech has skyrocketed from $930 million back in 2008 to over $12 billion by the beginning of 2015. Europe experienced the highest growth rate, with an increase of 215 percent to $1.48 billion in 2014,” a recent report by Accenture highlighted.
Fintech and the business world
Fintech’s rise and emergence within the entrepreneurial ecosystem has completely transformed the way organizations do businesses; by turning the traditional financial model on its head, fintech has stepped up to give customers an easier, faster, and more convenient option than before.
Setting up a new business has become much cheaper and easier to do due the mass availability of online financial services, and this has reflected greatly on startups’ ability to grow much faster.
Fintech companies are more agile than traditional banks, in the sense of not having huge overhead costs and payments to make, thus allowing them to narrow their focus and attention on innovation and disrupting the market with their solutions.
Smartphones and Fintech
One cannot argue with the fact that smartphones act as the primary backbone of the fintech ecosystem, greatly thanks to the “always online” culture that we reside in today. Through constant and direct access to the Internet, and the myriad of services and apps that feed it, people’s behavior has drastically changed in the last decade.
In light of these developments, there is an expectation of being able to handle one’s financial affairs as seamlessly as checking email or posting on Facebook.
Rapidly growing sector
In the U.S. and Europe, Fintech “ecosystems” have stimulated technological innovation, made financial markets and systems more efficient, and improved the overall customer experience.
According to study by Strategy&, these ecosystems — composed of governments, financial institutions, and entrepreneurs— have also shown that they can energize the broader local economy by attracting talented, ambitious people and becoming a locus of creative thinking and business activity.
However, Gulf Cooperation Council (GCC) countries are lagging behind, but not for long, since they are attempting to establish a more robust fintech ecosystem to nurture locally-grown startups.
“Moreover, a consensus is emerging among governments and financial institutions that nurturing these ecosystems is important and beneficial for the region. Indeed, there are already some success stories in the GCC, particularly in the United Arab Emirates (UAE) where incubators, enterprise development funds and programs, and innovation hubs are supporting the creation and growth of local entrepreneurs,” the report stated.
The Strategy& report highlighted that these ecosystems are critical to nurturing the kind of technological innovation necessary to make financial markets and systems more efficient and improve the overall customer experience.
“A vibrant Fintech ecosystem can stimulate the broader local economy by attracting talented, ambitious people and becoming a locus of creative thinking and business activity, since they enable growth opportunities for many other sectors,” it highlighted.
There are a plethora of ways Fintech can help boost the startup ecosystem, and push it toward becoming more financially stable and successful due to the ease and convenience of their solutions and services.
Let’s jump right in.
A little over a decade ago, receiving a business loan meant a visit to the bank, a truck-load of paperwork, complex applications, a lot of forms to fill, and a long wait. A lot of these startups failed to meet the standards banks set, and attempted to look somewhere else.
Fintech has stepped into this role, with some allowing businesses wide access to get their hands on funding. An example of this can be seen through solutions that allow some lenders to complete the loan process online. Business owners don’t need to gather documentation because they can simply link online accounts to their application.
This gives lenders more insight and information about the company beyond credit score and owner stakes. In addition, these solutions are much quicker than traditional means, by receiving approval in a matter of days or even hours.
Credit cards’ fall from grace can be mainly accredited to companies such as PayPal and Stripe, who have allowed entrepreneurs and SME owners to accept payments, send invoices, as well as pay creditors and employees using a computer.
In parallel, this is a saving grace for many businesses, since this unlocks the ability for merchants and startup owners to make transactions using credit and/or credit cards without the need for a merchant banking account.
Even now, the smallest of startups has the ability to transfer and receive payments using mobile phones just with the right app downloaded.
Never-ending payment technology
Many large companies rely on larger partners or affiliates to remain afloat, fintech has allowed these companies to transfer money to each other in the simplest of ways while conforming to regional and international regulations, making this monumental task even simpler.
This not only gets the money where it needs to be and fast, but also keeps these transactions and finances in compliance with anti-terrorist, banking and other payment regulations set forth.
Check payments are considered an SME’s worst nightmare, since sometimes it takes excruciating amounts of time to cash them in and get cleared, especially when these companies need a rapid surge of cash flow.
The beauty of Fintech is that it turns this process entirely online, while making it faster for an organization to access their funds. Some companies, for example, offer a service that processes the payments overnight, so the business has money in its accounts by the next day.
This is ideal for landlords and real estate companies that tend to receive monthly rental payments.
This is especially useful for younger startups which experience trouble in managing their bill payments online. Small business owners and some startups may have trouble managing their own routine bills.
Thus SMEs might hope to delay payment until the due date to help manage operating cash, but at the same time, these businesses don’t want to pay too late because they may incur late fees, damage their credit and get a bad reputation.
Some of these fintech solutions include the ability to gather all their bills in one place, which offers help in managing these payment to ensure that they are being paid on time, and sometimes being paid online.
The rise of Fintech has opened Pandora’s Box of financial opportunities, allowing businesses to offer more services at the fraction of the price.
In retrospect, entrepreneurs and SMEs need to keep their eyes wide open on the advancements the fintech sector is evolving into, since they have the full might to improve their services and business, as well as stay at the forefront of their respected markets.
Trading apps move to get a live person to hear your problems
It’s one of the downsides of apps that make things like ordering food or buying stocks and cryptocurrencies easier: What happens when something goes wrong?
It’s often a frustrating chase, tapping through menu after menu in hopes of reaching a person to fix the problem. It’s also something that upstart companies upending the investment and trading industry are increasingly acknowledging.
Robinhood, the app that helps more than 22 million people trade stocks and cryptocurrencies, announced Tuesday that it’s offering 24/7 phone support for its customers to cover almost every issue. It follows up on an announcement by Coinbase, the cryptocurrency trading platform that said last month it would launch 24/7 phone service by the end of the year for many customers.
Before its own stock started trading on the public market for the first time, Robinhood cited “concerns about limited customer support” as one of its challenges. Earlier this year, Robinhood also settled a wrongful death lawsuit filed by the family of a 20-year-old alleging he committed suicide after his emails to the company’s customer support about a $730,000 negative balance on his account received only auto-generated replies.
To reach Robinhood’s customer support in its early days meant to communicate mostly over email, but it’s been adding more live phone support in recent months.
“It takes a while to build a great support organization, especially in a highly regulated business,” said Gretchen Howard, Robinhood Market Inc.’s chief operating officer. Agents need to be licensed, for example, and Robinhood more than tripled its number of customer-support workers between March 2020 and June 2021 to nearly 2,700.
With so many first-time investors making up its base, many of the customer questions coming into Robinhood are about setting up a bank account or going through tax reporting for the first time. But the demand can vary wildly by the day.
“If someone famous tweets about crypto, our crypto volumes can go up 10x” in an instant, Howard said.
Customers logged into Robinhood’s app can now request a callback from a representative. Through the process, the app will also try to help customers solve the problem themselves, if possible. The company based in Menlo Park, California, is still working on how to get live phone service to customers who can’t log into their accounts.
William Van Horn II, a 30-year-old in Pensacola, Florida, has already experienced Robinhood’s customer service several times. He hasn’t always been pleased.
He said he once accidentally deposited $1,000 instead of $100 into his account. Quickly afterward he sent an email to customer service, hoping to cancel the deposit. He eventually got a representative on the phone who tried to walk him through several steps. But Van Horn said he never was able to cancel the $1,000 deposit, or to at least claw back the extra $900.
Van Horn has other complaints about Robinhood’s customer service, but it hasn’t been enough to get him to stop using the app.
“The customer service is lacking,” he said, “but the interface is still pretty much the best in terms of mobile use.”
NEW YORK (AP)
Google kills plans for financial service Plex
Google’s plans of extending its horizon into financial services in collaboration with the banking sector have reached an end as the search engine kills off its Plex service before the initial launch, The Wall Street Journal reports.
The Mountain View company stunned its users with news of halting the development of its banking service as Google Pay subscribers were eagerly anticipating it. Google’s plans to deliver its users a bank account service could have set the first official stone to compete with Apple’s credit card feature.
However, the company’s efforts to terminate the release of its banking service will indefinitely end Google and its parent company’s efforts from entering the financial sector until further notice.
Earlier in 2019, Google’s parent company Alphabet Inc. informed its subscribers of a futuristic plan of releasing Google Pay, a digital wallet allowing the platform’s userbase to sign up for superior checking accounts and debit cards with a bundle of financial establishments.
Currently, Google Pay is the Android maker’s leading financial service provider serving users with the ability to send and receive money, store credit card, debit card data on the platform, and use the information stored on their devices for in-app payments, be it online or in-person.
Initially, the digital wallet service was labeled as Cache, later changed to Plex.
In terms of functionality, Plex would synchronize with Google Pay digital dashboard, where users indulge in various purchasing activities. The banking service would include built-in savings targets to assist users with monetary savings.
In a partnership with investment banking company Citigroup and Stanford Federal Credit Union, the Big Tech titan fixated its glare on these firms as an extensive number of Google’s employees bank there.
Originally, based on Google’s initial plan, Plex’s official launch was tapped for 2020. However, with COVID-19 overtaking the global economy, the company pushed back its deadline until it completely dropped the project in September.
As an alternative approach to stay in the department as a financial service provider, the company chose to maintain its sole focus on “delivering digital enablement for banks and other financial services providers rather than us serving as the provider of these services,” a Google spokesperson informed The Wall Street Journal.
For a company as ambitious as Google, it seems very unlikely that the killing of its banking service will be the end of its maneuvers in the digital financial sector as experts are firm believers that the fintech industry will maintain its exponential growth in the upcoming years.
Mastercard, DTA partner up to release digital ID service In Australia
Multinational credit card company Mastercard announced on Monday a new collaboration with the Digital Transformation Agency (DTA) as it implements plans to create digital identities and age verification system, a move that will manifest the company as a leading digital identity service provider in Australia.
The Trusted Digital Identity Framework (TDIF) will be a unison maneuver that will put both Mastercard and the DTA under one umbrella. Both entities will investigate a chain of private sector-led pilots alongside the effects digital verification services could impose on the retailer and consumer comprehension and anticipations from online experiences.
Last year, a parliamentary committee introduced a recommendation inquiry setting the first step towards a safer online environment, aiming to prevent minors from accessing online pornography sites. This had a direct affiliation to the DTA’s objectives of becoming the country’s first federal government agency to obtain an online age verification system.
“Australians are increasingly expecting no disruptions between their online and physical lives, and identity is an area that must keep pace with those expectations,” Australia Mastercard President Richard Wormald said in a statement.
“Public-private pilots have the potential to make it easier to use these verified identities security, everywhere they travel,” Wormald added.
The framework’s initial announcement was revealed in December of last year, with three parties initiating the first steps to launch two trials.
The first trial mainly focused on the identity verification process of students’ registration and digital exams at a university campus, while the second trial conducted united Mastercard’s digital ID solution with an already existing verification process in collaboration with the postal services.
Through TDIF, users will have unlimited capacity to gain entry to any government services and benefit by adopting a reusable digital identity approach without the need to show official documentation every time.
In addition, the framework’s influence will reach third-party providers to obtain access to the system as well.
Even though the DTA is hastily working on the implementation plans for TDIF, digital privacy experts are warning of a hazardous downfall that could follow the trusted framework. Analysts warn Australian authorities from deeply indulging in a system that has not been supervised by tech experts and the community.
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