The financial sector is still almost entirely paper-based. Even with online banking, money still moves slowly between accounts. Moreover, banking transactions are not accessible to everyone. Dan Schatt and Domenic Carosa, co-founders of crypto investment startup Earnity, note that about 1 billion adults worldwide have no bank accounts.
The market for international money transfers has been estimated at $500 billion. However, the market for remittances is not a level playing field with several players from legacy providers as well as new entrants such as peer-to-peer companies disrupting the space.
However, new Financial Technology companies (“Fintech”, for short) could change that in the same way that recent high-tech inventions have transformed how people date, travel, and socialize.
Fintech is set to revolutionize daily life even more dramatically than the internet because of blockchain technology. Blockchain is an online database that records information that multiple people can access. In addition, it creates trust by allowing all parties to track transactions securely, using cryptography (codes).
A trusted network of financial institutions and investors has already started adopting Blockchain without Bitcoin. The Australian Securities Exchange became the world’s first stock exchange to adopt Blockchain in December 2016. Dan Schatt, Domenic Carosa, and the professionals working at Earnity recognize that Blockchain could also be used in supply chains to certify that a product is organic or fair trade, for instance.
The financial industry has experienced an explosion of Fintech products being developed during the past few years—from new digital banks and payment services to crowdfunding platforms, online marketplaces, and robo-advisors. Some of these products have become popular by making a product a combination of traditional finance and modern technology.
It’s important to highlight that Fintech is about technology and how people work together, from investors to entrepreneurs to customers. This requires cooperation between everyone involved in the value chain, making redesigning processes and business models necessary for financial institutions.