Unpacking FinTech: A financial journalism deep dive

By Angie Scholtz

1. INTRODUCTION:

The world over, the inclusion and advancement of technology in the financial services sectors and markets have become more and more prevailing to the extent where the accepted acronym for this has been determined to be FinTech which essentially relates to Financial Technology as a designated term.

The world is aware of the various levels of information technology infrastructure in various countries which would by default place certain countries, in the developed world at an advantage over other developing countries on the FinTech front. This not only holds true for the development of the systems but also for the use of the systems by the end user. On the flip side, it also allows for the developing countries to learn lessons from those who have already gone through the teething phases and plan appropriately.

Put plainly FinTech can be seen as any form of technology employed or deployed to enhance financial services.

2. Unpacking the impact of FinTech:

FinTech startups in Africa are facing four key challenges on the road to sustainability: reaching, scale and profitability, navigating an uncertain regulatory environment, managing scarcity, and building robust corporate governance foundations. (McKinsley & Company, Aug 2022)

FinTech is not only designed to enhance financial services and is therefore not limited to financial or technology companies. We have seen the recent move in all major as well as smaller companies, more recently, to the development of applications and other forms of software that allows for the conclusion and ease of transacting and doing business while aiming to provide a safer experience for the end user with their data being protected.

According to a Fintech Entrepreneur in Morocco: In Bank-led countries, building partnerships with incumbents is critical for success” which emphasizes the need for a collaborative approach on the idea of Fintech.

In the financial landscape specifically, the main design of Financial Technology is to enhance the end user experience and to make doing business easier and more fluid with financial service providers, which in essence allows financial service providers to enter new markets and reach a new customer base which they would not otherwise have had access to. (Motinga, 2023)

The younger generation who would essentially end up being the ultimate beneficiaries and users once the growing pains have been sorted out and we have already noticed the trend of moving from paper based towards online, cloud based and mobile technology with the aim at avoidance of standing in queues or leaving the comfort of your home for any sort of transacting.

Professor Anicia Peters Tech expert from Namibia explains.

Anicia Peters Professor Anicia Peters:

However positive the FinTech impact would be, there are some legal and regulatory infrastructures that need to be in place in as far as regulations of the data integrity of the company utilizing the technology for their business and the benefit of the customer. It is a given that legal systems lag technological developments in as far as cyber-crimes are concerned and this needs to be rectified sooner rather than later with these trends needing to be more proactive and not as reactive as they currently tend to be.

As far as human interaction and the impact of FinTech is concerned, the person-to-person relationship and social engagement would become a deliberate action instead of the default way of doing business as we grew up knowing.

Fintech is likely to make business transactions, objective, less personal and more based on factual data without considering the cultural and sentimental aspects and values attached to the business relationships especially in the financial services sector where the customer and advisors are supposed to have a relationship based on trust so that proper advice can be followed after a robust discussion and unpacking of impacts of specific transactions and especially investments. South African economist Dawie Roodt explains.

Dawie Roodt] Dawie Roodt:

Businesses who keep up with the trends and are ahead of the curve and who have the financial means to develop the technology employed would by default enjoy a competitive advantage over the smaller SME and MSME sectors which is likely to suffer if they are unable to keep up with the advancements made on the front of technology specifically.

However, there is room for the pooling of resources of smaller entities in the same industry, whether financial or not, to develop technology that would allow them to grow their business and customer bases when applying the technology as would become the norm soon.

As far as market access is concerned, FinTech would eventually evolve into a means of business where members would be able to manage their investments individually without the assistance of an advisors should this client be a financially literate individual. This would ensure that the current advisor and broker base would be reduced as the customers are essentially the people who would have to make the decision on the use of the technology and the easier the use thereof the higher the uptake and participation is likely to be.

3. FinTech Deep Dive

Surely FinTech would not all be doom and gloom and remove the human interaction and relationships as a key stakeholder between people, but it could also enhance the lives of the users of the technology provided that these users make the conscious decisions to interact with each.

Provided that the necessary protections are in place and operational at such time, Fintech can ensure the digital identity verification through biometrics, which would essentially fight the war against identity theft and prevent fraud in the sense of transactions. (Motinga, 2023)

Secondly, blockchain and smart contracts would allow for improved transparency and safety of individuals with the automation of transactions and especially financial market involvements (Motinga, 2023). Customers would be able to verify their identity through facial recognition to allow them to trade safely and undertake various disclaimers should this be their preferred way of operating. Globally, blockchain technology and cryptocurrency are still in the early stages of adoption, but they are also growing fast. (McKinsley & Company, Aug 2022)

FinTech would be able to provide more accurate predictions in as far as the investments are concerned to allow for members to choose their investment portfolios while they are economically active to suite their specific individual needs as one can never have a one-size-fits-all approach to financial transactions and advice. This would in turn provide a level of protection to the Trustees, intermediary or broker as well as the various governing Boards in the sense of the customer taking responsibility for the decisions made and absolving the Trustees to an extent as far as the advice component is concerned.

Change is inevitable and with any change there is always a level of initial resistance, until such time that the public can identify the benefits the technological advancements can provide and make their lives easier through providing smart solutions, the developer of the technology needs to ensure that the use of the technology remains as user friendly and safe as possible at the end of the day.

FinTech is challenging traditional structures and is creating efficiency gains by opening up the financial services value chain. Much of the interest in FinTech is related to the way in which innovation in the financial sector can lead to increased access, better services, and gains in efficiency. (N.R, 2018)

Regulators of the financial industries would need to keep on their toes to stay abreast of the trends and also to know when a system or service provider is rolled out. Regulators would need to ensure that the regulations and riles applicable to FinTech are applied.

4. Conclusion

Even though Fintech might uncover risks that we do not even know at this point, the benefits it would bring about is likely to outweigh the negative aspects thereof and when used correctly can greatly enhance the experience and possibly financial freedom of the customers.