The Rise of Cryptocurrencies
The fastest growing and most newsworthy these days in relation to FinTech is in cryptocurrencies such as bitcoin, ethereum, and others that we see which are getting a lot of acceptance in the mainstream now because of the tremendous value that the underlying technology can provide. The reason I feel it is growing so quickly is that it provides a distributed transparent network that is unlike anything that has ever been seen before. It provides an opportunity to eliminate a lot of the inefficiencies in the traditional banking system. Also, give the power of transaction into the individual’s hands from a pear to pear perspective. Therefore they will not have to worry about going through a central mechanism.
Power to the Unbankable Population
Individuals that regularly would not have access to having a bank account around the world. They would now have access to it via a mobile phone. If you look at the unbankable population around the world which is around 5 billion. They now have the power to have a bank account. That is going to provide tremendous value and really reshape the landscape of FinTech moving forward.
The Future of Money
When you start to think about the future of money. As well as how cryptocurrencies can interact. With ethereum, it is not only having a cryptocurrency as a new form of money. But it is also going to completely change the way that we transact money. So with ethereum, you can build these smart digital contracts on top of its protocol. As a simple example, a peer to peer transaction or a transaction at a vendor but with the entereum protocol it can actually build these transactions and engineer them into how you engage in different things on a daily basis.
So I could for example call Uber to come to pick me up from my home. Then drive me to my office, that could engage a smart contract between myself and the vendor Uber. The ethereum smart contract can execute releasing my funds from my cryptocurrency wallet to the vendor Uber. Therefore that transaction would occur and that could all be built on top of an ethereum type protocol. I think that is really going to change how we actually transact in the future with different currencies. Also it is going to provide a lot of value to many different things that we do on a daily basis.
I think why FinTech startups are so unique to other startup companies is because of the regulations and compliance that is in place for these types of businesses. When you look at the financial technology companies that Capital Innovators has invested in. We’ve really guided them so that your product has to be 100% before you put it in your customer’s hands. There really is no beta phase with a financial technology product. Because if you are going to put a product in a bank for example and they are running money through that from their customers. It has to be 100% perfect out the gate. So that is one of the big reasons financial technology companies tracked these different individuals. Because they understand that you have to have somebody that understands the regulatory and compliance aspects of the business. In order to make sure that the product or service you are building out is going to fit in those confines and be successful in the marketplace.
The Future of Banks
I think the future of banks will not be conventional banks at all. I can see a future where some of the largest technology companies become the largest banks. Look at Facebook, for example. Facebook has recently implemented mobile payments through Facebook. So when you think about the distribution layer that they have. As well as their very loyal consumers, especially the younger generation that has adopted it. They do not like to be marketed to the same way that the older generation does. When Facebook implements something like a mobile payments platform, or a mobile lending platform. You already have that user loyalty so they are going to adopt it much faster. Therefore I feel the big acquisitions are going to be taking place regarding FinTech will be from big companies like Facebook, Google, and, Alibaba. Some of these larger technology players that want to add that to their service. It will be these big companies and not banks that will be the future of banking.
Banks will get left behind
A lot of banks are not adopting financial technologies at the rate at which the innovation is occurring and so they are going to get left behind. This is because they are very at risk adverse organizations that have been making a tremendous amount of money for so many years that they are adverse to that change. There are some forward-thinking banks that are adopting that and they are starting to partner with the financial technology companies that are really starting to make a move in the market. But in my opinion, the players that will get the most out of the market will be the larger technology companies around the world.