Imagine yourself as a bank executive, competing against a global, multi-service, low-cost, digital bank; customers checking their accounts via smartphones, paying bills or transferring money with a swipe of finger.
An AI-powered engine allows them to play around with their ETF portfolios with absolutely no fees, or cross-border payments.
Take a moment to consider facing a competitor with a nimble footprint, prototyping new services quickly, managing regulatory compliance transparently, using an AI system to limit fraud losses, and hedging currency risk using cryptocurrencies.
While this competitor does not actually exist today, the financial services industry is well on its way to transforming this not-so distant dream into reality, due to the disruptive technologies that have changed the playing field.
While many banks lean on their IT departments to spearhead efforts of innovation, and support legacy systems in parallel, the FinTech sector are leading the innovative line with user-friendly solutions developed from the ground up.
The pace of change shows no signs of slowing down; and the main driving force of this hike is blockchain.
According to a report by Market Data Forecast, the global FinTech market is foreseen to expand from $1.23 billion in 2020 to $9.2 billion in 2025, with a stunning growth rate (CAGR) of 75.9 percent.
“The recent Covid-19 outbreak has highlighted the demand for digital transformation in the banking sector as people are forced to use online services and limit their visits to the bank,” the report said, adding that “for this reason, most of the banking companies are collaborating with financial tech providers to offer differentiated and competitive services, since the digital customer experience will be the main competitive advantage and is expected to drive the market.”
But before we delve deeper into the effects of blockchain on FinTech, we must first define the technology itself.
What is blockchain?
Blockchain is a distributed ledger technology (DLT) that allows information to be stored globally on thousands of servers. When two companies are in business together and use cryptocurrency as payment, the agreement forms the “block” in the chain.
Blockchain links and secures these blocks using cryptography.
The most vital features of the technologies are three-fold:
- Decentralized – a blockchain-powered network excludes the risks of data being kept centrally by storing it across the network.
- Distributed ledger is a synchronized database and accessible across various locations and geographies by multiple participants. Each of the computers in the distributed network holds a copy of the ledger to guarantee transparency and prevent a single point of failure (SPOF).
- Immutable record – all blockchain networks follow a particular protocol for validating new blocks. Once registered, the data in any block can’t be changed without altering all the following blocks, which requires the network’s consent.
These attributes extend far beyond economics but are ideal for what FinTech hopes to achieve and accomplish within the financial services industry. In parallel to that, blockchain-powered FinTech applications can resolve the issue of trust between two transacting parties operating on equal term.
Between bulletproof identity authentication protocols and smart contracts, blockchain is considered one of the most secure environments on the market.
Blockchain in the FinTech landscape
Blockchain offers a more seamless, effective, and transparent alternative to the legacy systems currently in place, mainly catered around the concept of fairness and decentralization, which likely creates the perfect financial storm to revamp the financial industry as a whole.
- Eliminating the middleman
What usually takes regular banks three to five business days to process fund transfers due to all the necessary hoops and protocols needed, would take blockchain-powered FinTech apps minutes to complete.
Not only that, but these applications can grant users real-time data updating features that paints a clear and error-free picture of the transactions being made.
- Smart contracts
According to StartUs Insights, Smart contracts that are embedded into a blockchain does not rely on a centralized stakeholder for hosting and controlling, which eliminates chances of data manipulation and/or conflicts of interests.
“Any attempts to modify the contract or its contacts will be automatically corrected by other blockchain nodes, making it too expensive and nearly impossible to tamper with the agreement,” the report by StartUs Insights highlighted.
An example of this can be seen through a collaboration between Credit Suisse and a startup called Synaps a joint initiative by Symbiont and Ipreo, which focuses on automating and improving the global loan syndicate market using blockchain-based smart contracts.
The collaboration is developing a solution for easing the process of arranging, signing, and executing syndicated loan agreements.
- Lowering transaction costs
It comes as no surprise that banks are making fortunes through transactional fees, as financial regulators are still cashing in by essentially permitting customers to use their own money.
When blockchain firmly steps into the mix, this cost will drastically plummet, due to their ability to grant users direct, peer-to-peer transactions, unshackling customers from all intermediaries.
An example of this can be seen through a startup called Request Network, which has developed a solution for not only directly sending and receiving money but also for paying and issuing invoices, for businesses to accept money for online payments, as well as for cities and governments to be more transparent and allowing citizens to monitor their transactions.
- Finance beyond borders
The beauty of blockchain is that it’s entirely based on the Internet; shedding away the need for any operational setup and the need to tie into any local regulation or entity. One only needs a private account to begin using it.
This frees customers from the parameters set forth by banks to make transactions, paving the way for more decentralized systems that would allow global transactions to happen while only needing Internet access.
- Fair and transparent regulations & auditing
The mainstream use of blockchain within the FinTech sector would enable developers to create the most concise auditing protocols.
According to U.S.-based software company TheBlockBox, a blockchain functions as a storage of linear blocks that adds a new entry for every new action, but it never tampers with old blocks no matter how big the system gets.
“This can provide all the data needed to conduct a quick and secure audit of transactions, which is precisely why transparency is something experts hail as the main upside of blockchain networks,” the TheBlockBox report explained.
While the hype behind blockchain-powered FinTech is alive and well, the industry is still relatively nascent especially for decentralized networks to become a mainstream financial model.
The model goes completely against the tide of the financial industry today, thus making it a more radical approach to an already hyper competitive industry.
However, with the current technological advancements making strides every day, we should see the technology starting to attract the ears and eyes of the many in no time.
Buy now pay later services to reach $995 Bn globally in 2026
Commerce has come a long way in the 21st century; it has evolved from the simple act of exchanging banknotes for goods, to the current digital age where you can make transactions by a digital currency mined by someone on the other side of the planet.
Commerce transformed into eCommerce, and with it came a plethora of strategies, payment methods, and gateways that can give you the option to pay at your convenience based on your preferences.
As such, technology took financial services and procedures to the digital realm, and then birthing the popular eCommerce strategy of Buy Now Pay Later, that many have found to be go-to method of payment when online shopping.
A new study from Juniper Research has found that spending via buy now pay later services, which are integrated within eCommerce checkout options, including fixed instalment plans and flexible credit accounts, will reach $995 billion in 2026, from $266 billion in 2021.
This 274 percent growth will be fueled by a greater appetite from users for credit to spread costs, particularly in the wake of the pandemic, which has put extreme pressure on user finances.
The research identified that, while regulations will inevitably place restrictions on services, such as limiting charges or enforcing affordability checks, these changes will not diminish the appeal or growth of the platforms; merely placing them on a more secure footing.
The report recommends that vendors focus on improving the transparency and use of credit assessment and reporting now to minimize future disruption.
Buy Now Pay Later a go-to eCommerce
The new research, Buy Now Pay Later: Vendor Strategies, Regulatory Frameworks & Market Forecasts 2021-2026, found that, by 2026, buy now pay later services will account for over 24 percent of global eCommerce transactions for physical goods by value, from just 9% in 2021.
“As a tool to split the cost for users, buy now pay later is ideally suited for high-cost items, as it enables users to seamlessly split large costs into smaller, more manageable payments. By 2026, these platforms will increasingly become the norm for lower-cost purchases as well; driven by user demand and eCommerce platform integrations,” Research co-author Damla Sat explained.
Buy Now Pay Later to reach 1.5 billion in 2026
The research also found that the global number of buy now pay later users will exceed 1.5 billion in 2026, from 340 million in 2021.
In turn, the report recommends that eCommerce merchants must integrate buy now pay later services immediately, or risk losing transactions to other payment platforms which offer preferable payment options.
SoftBank invests $60m in Malaysian digital marketing business
SoftBank and Axiata Group announced Tuesday an investment of $60 million by the Japanese company in ADA, a digital analytics, artificial intelligence (AI), and marketing company in the Malaysian telecom’s conglomerate.
The investment is aimed at expanding and speeding ADA’s analytics, data and AI digital marketing business in Asia, Axiata and SoftBank said in a joint statement. ADA currently serves 1,300 customers in the region.
In addition, Daichi Nozaki, SoftBank Vice President and Head of the Enterprise Business Unit’s Global Business Division, will join the ADA board in mid-May 2021.
SoftBank Corp. Representative Director and Chairman Ken Miyauchi said the ADA investment enables his company to embark on its “Beyond Japan” business strategy.
“We will utilize ADA’s know-how in data and AI, and its support structures,” Miyauchi told a virtual news conference. “And by closely collaborating with ADA, I’m confident we can propose new digital marketing solutions to companies in Asia and help support their digital transformation.”
The investment is also in line with SoftBank’s growth strategy announced during its initial public offering in 2018, he said.
With the investment, SoftBank will hold a 23.07 percent stake in ADA, which has a valuation of 1.07 billion ringgit ($260 million). Axiata Digital Services remains ADA’s majority shareholder at 63.47 percent.
Japan’s Sumitomo owns a 13.46 percent stake.
Also, Axiata Group President and CEO Izzaddin Idris said both Axiata and SoftBank discovered they have common ground, and that ADA could fit well with some of SoftBank’s existing businesses.
ADA aims for a $2 billion valuation in the next five years across Southeast Asia.
“We have no immediate plans to spin off ADA via a public listing,” Izzaddin said. “Listings are to raise capital, but ADA is already raising capital without listing,” he added.
ADA CEO Srinivas Gattamneni said the $60 million investment would be used to develop a big data platform and AI models focused on digital marketing and the automation of content creation for the advertising industry.
Miyauchi said SoftBank sees tremendous potential in digital marketing, digital communication, digital automation and security services — with digital marketing in Asia as a promising growth area.
The latest advertising statistics show that as of January 2021, there were 5.22 billion unique mobile phone users in the world, as DataReportal noted. This makes up 66.6 percent of the total global population.
It also marks a 1.8 percent year-over-year increase from January 2020. In this one year, the world gained 93 million more mobile phone users. If these digital marketing statistics continue to trend, we’ll be seeing even more mobile phone users over the coming years.
MTN Rwanda launches mobile money FinTech services
MTN Rwanda announced late last week the launch of a FinTech subsidiary called Mobile Money Rwanda LTTD, to provide and manage mobile money services throughout the country.
The announcement – which was made as the operator received approval from National Bank of Rwanda to launch the FinTech service – also places Chantal Kagame as its Chief Executive Officer to drive business development, strategy, innovation, and day to day operations of the company.
According to a statement by the South African courier, the setting up of Mobile Money Rwanda Ltd is in line with MTN Rwanda’s strategy to lead digital solutions while contributing to the national economic strategy on enhancing cashless transactions that offer convenience and security to all Rwandans.
“We are very glad to announce the establishment of Mobile Money Rwanda Ltd as a wholly owned subsidiary of MTN Rwanda. One of the key pillars in our strategy is to establish platforms that our customers find valuable. This restructure will ensure that the Mobile Money business remains agile, well poised for future growth and accelerated innovation. Mobile Money has matured over the last ten years in Rwanda, and this marks a pivotal milestone in our journey toward a cashless economy,” MTN Rwanda CEO, Mitwa Ng’ambi said in a statement when speaking about the new standalone firm.
In parallel, Kagame highlighted the company’s commitment to enhance the MoMo user experience and keep innovating products and services aligned with their digital ambition.
“The transition process to a standalone business has now kicked off and we look forward to cementing Mobile Money Rwanda Ltd as a key FinTech player in the Rwandan market,” she added.
The South African-based telco already provides FinTech services under the name of MoMo, a service that has been in operation since 2010. According to figures by the company, MTN currently boasts about six million subscribers.
MTN claims the largest market and value share in the increasingly competitive telecoms sector of Rwanda.
The announcement comes in line with MTN’s ambition to expand within the large African market, as the courier placed a bid to receive an operating license in Ethiopia, as the country looks to liberalize its telecoms sector and digitize its economy.
Prior to Chantal’s appointment, she held the role of Chief Business and Corporate Affairs Officer since she joined MTN in 2018. She is a senior Telecom Executive with over 19 years of experience in Multinational Telecommunications.
She has a track record of excellent achievement in areas of Executive Leadership, Sales and Distribution, Mobile Financial Services, Strategy Development and Execution, Corporate Affairs and Credit Management.
Prior to joining MTN Rwanda, Chantal was the Deputy CEO/COO at Tigo Rwanda for 3 years and Head of Sales, Distribution and Corporate Affairs at the same company from 2011 to 2015.
The establishment of Mobile Money Rwanda Ltd does not in any way affect nor change the delivery of services to current Mobile Money customers. Mobile Money customers will continue to enjoy access to the wide range of MoMo products and services, the over 30,000 Mobile Money agents and 60,000 MoMoPay merchants across the country.
MTN foresees an even brighter future to further expand and deepen its offerings to the public in line with Rwanda’s vision to become a fully cashless economy.
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