CAN FINTECH BE THE FUTURE OF FINANCE SCOPE AND REVOLUTION?

Article Contents

Pardasani, P. (2024). CAN FINTECH BE THE FUTURE OF FINANCE SCOPE AND REVOLUTION?. Ecofunomics, 6(1), 32–40. https://doi.org/10.5281/zenodo.14015802

Abstract

This article explores the risks associated with online modes of transactions in the context of Fintech development. While Fintech offers numerous benefits, such as increased competition, efficiency, and improved financial inclusion, it also introduces new vulnerabilities, including the lack of safety nets, misuse of personal data, difficulties in customer identification, and electronic fraud. The study examines descriptively the impact of digital innovation on risk assessment and credit allocation, highlighting the higher riskiness of Fintech borrowers compared to traditional ones. Additionally, the article presents findings from a primary survey, indicating that while people trust online transactions for small activities, they still prefer physical banks for major transactions and lending/borrowing purposes. The discussion also touches upon the importance of regulatory measures and the potential for Fintech to complement traditional banking services rather than replace them.

Keywords: Fintech, Cryptocurrencies, Credit Markets

JEL Classifications: O330, O300, G000

Fintech: The Introduction

Fintech hypes abound. In the news, Fintech is “disruptive”, “revolutionary” and armed with “digital weapons”, that will “tear down” barriers and traditional financial institutions (World Economic Forum, 2017).

“By partnering with Fintech startups, banks will give their account holders the right measure of security and speed. Account holders can know that their money is safe, and they can enjoy the latest financial technology. This is the way to become a digital bank.”

The term ‘Fintech’ has appeared recently in business journals to describe the disruptive challenge to the financial sector of the introduction of faster, cheaper, and human-centered financial services. The term has become a buzzword among private and institutional investors who invested more than 50 billion dollars into the sector between 2010 and 2015 (Accenture, 2015). The visionary statement made by Bill Gates in 1994 that “banking is necessary, banks are not” has become a self-reinforcing prophecy, with 6,000 – 7,000 Fintech companies across the world now trying to obtain a slice of the banking industry’s profitable business. Strategic advisory firms have already put the emerging Fintech trend at the top of their agendas, with the goal of providing universal banks with a better understanding of likely future scenarios. The growing interest in Fintech will soon be visible in the academic literature, but there is currently a large knowledge deficit in this field. Fintech is an evolving concept that has so far created little historical evidence or statistically significant time-series data for analysis, leaving researchers only secondary data with which to work, or sponsored research carried out by large advisory companies. As signs are already emerging that such financial technologies have the ability to significantly impact the use of cash and current banking and financial practices, and may empower individuals living at the bottom of the pyramid, the validity of research into the various areas of Fintech and the financial sector is apparent.

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