FinTech - The Rehashing of Old Payment Methods And Focus on Blockchain Technology

FinTech is a term that will pop up across the world more and more. There is no denying that the world of finance is desperately in need for a new breed of technological advancement, after being “stuck” in the same principles and systems for over half a decade. Mobile payments are often touted as an important aspect of FinTech, but how innovative are these payment methods really? Not as innovative as Bitcoin and blockchain technology, that’s for sure.

Also read: Apple Pay: Same Old Ball & Chain

Innovation in the Financial Sector At a Standstill

Whenever someone talks about how the current financial ecosystem is working fine the way it is, the reason for the lack of innovation becomes crystal clear. Whenever something is not utterly broken, there is no reason to fix it, right? Well, that is where most people are wrong, especially when it comes to the way finances are and should be handled.

Our society has been reaping the benefits of an established banking structure in most parts of the world while leaving some regions underbanked and even unbanked. In the Western world, it is only normal to open a bank account at a certain age, and use a bank card tied to that account. At a later age, having a credit card is less of luxury and more of a mainstream commodity in that part of the world.

All of this is in stark contrast to the unbanked and underbanked parts of the globe, where people simply don’t have access to a financial system as the Western world knows it. Granted, everyone can open a bank account, yet some governments ask for certain documents for a citizen to qualify for even having the right to get an account. Not everyone can or wants to provide that form if documentation, as it only gives the local government even more insight into their financial habits.

During the recent Greece crisis/debacle/charade, “capital control” was a very popular term. To put this in layman terms: money from outside of Greece was not being accepted, and Greek citizens could not transfer their funds out of the country either. Despite having a unified currency - the EURO, which is used in most EU countries - financial institutions prohibited moving funds outside of the country. Quite an astonishing feat in this day and age, don’t you think?

This begs the question why a currency such as the EURO was invented in the first placed. Creating a unified Europe was one thing, but giving most countries exactly the same coin was something entirely different. On the one hand, the EURO solved the problem of currency exchange requirements while traveling from one European country to the next, a welcome change in that regard might I add.

But on the other hand, it creates a closed down financial ecosystem in which all countries where the EURO is used are tied to the European Central Bank. Every individual country still has their own local bank branches, but they all answer to the European Central Bank as well. And as was seen during the Greek Tragedy of 2015, that European Central Bank held all the cards to bail out Greece or drop them from the EU. Such financial power in the hands of a handful of people is wrong, an abomination of power that invites corruption on all levels. But that is a discussion for another time.

So what makes Greece able to exert capital controls in their own country, despite having to answer to the European Central Bank? The answer to that is simple: Greece still had a stash of cash within their own ecosystem of banks and locked down all of that funds for a time. Even though those funds belonged to the customers of those banks, the Greek government exerted its absolute power of the money of individuals. Clearly, the current financial system is broken.

FinTech Innovation: Rehashing The Old Ecosystem Without Changes

Alas, the time has finally come for developers, financial institutions and engineers to look at the future and build new platforms, most of which are focused on mobile payments. With so many people carrying a smartphone with them every day, it only makes sense to turn that device into a form of payment sooner or later. And it has to be said, the everyday consumer is taking a liking to the idea of using their mobile device for payments.

In a recent study, it showed that consumers are not a fan of digital wallets at all. They feel insecure by storing all of that financial data on their mobile device, and giving out sensitive information to app providers. Oddly enough, those same customers have no problem linking their credit card or bank account to mobile payment options such as Paypal or Apple Pay.

There is nothing that makes a digital wallet more or less secure than the Apple Pay or Paypal applications, mind you. All of these services control the consumer’s details, including financial data and process it on behalf of the customer. And the worst part is, all of these services are centralized, just like the European Central Bank is a centralized institution.

FinTech is currently evolving in such a way that the new “wave of innovation” will focus on bringing many more mobile payment applications will be revealed to the public. To counter that statement, just because a new mobile payment application is launched, that doesn’t make it FinTech or innovation, as it is rehashing the same old payment methods.

Take any type of mobile payment application in the App Store of your mobile operating system, and 99% of them will ask the consumer to link their bank account, credit card or debit card to this “new” service. In the end, there is very little innovation going on in this regard, as consumers are still forced to rely on the existing financial infrastructure that has been around for 50 years, and has seen little to no innovation to speak of.

The New Breed of Technology Is Already Here

However, it has to be said that a small number of mobile payment options are looking at a brand new technology, called the blockchain. The term blockchain is related to Bitcoin, a disruptive digital currency that acts as a borderless payment method. No central authorities are involved, nor are there any banks issuing Bitcoin, as all aspects of this new type of economy are controlled by the individual users.

And this is what a lot of financial institutions are exploring at this very moment. Creating a more transparent system which facilitates the transfer of value around the world at far cheaper rates is a true innovation in the world of finance. Blockchain technology is an area of technology that was despised by financial institutions in the early days, but as the technology evolved, the same institutions started to see the benefits of working with the blockchain.

It will take some time until the first blockchain-based applications and platforms make it to the world of finance as we know it. But rest assured, there is a new wave of innovation just around the corner, which will not rely on the outdated financial infrastructure we have all grown accustomed to. The blockchain will change the world of finance as we know it, and there has never been a more exciting time for FinTech than right now.

What are your thoughts on the current state of FinTech innovation, and what type of blockchain-based solutions can we expect in the next few years? Let us know in the comments below!

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FinTech Innovation is Not Centralized, Blockchain Technology Could Be The Key To Success

When it comes to innovations in the financial sector, most experts are looking towards London, as it is the financial capital of the world. But these experts tend to forget that Fintech innovation can come from any corner of the world, as not all of the development focused in centralized in London itself. In fact, there are at least five major cities that could take the crown from London in terms of Fintech innovation in a few years from now.

FinTech Development Efforts Are Not Centralized

There are only a handful of places on this planet where the financial sector is seeing its biggest growth and largest untapped potential. Silicon Valley, despite being mostly tech-oriented, has played - and will be playing - an integral role in the future development of FinTech applications and platforms.

And who can forget about London, the world’s financial capital. Most companies that are exploring technology, in general, or FinTech more specifically, are opening up shop in London. The reason for that is simple: potential investors are just a few streets away, and there is a lot of money changing hands in the financial capital of the world.

In fact, there are people from all over the world flocking to either Silicon Valley or London in the hopes of hitting paydirt with their idea. And while a lot of those projects will receive funding or guidance in one way, shape, or form, not all of them come to fruition. That is not a surprise either, as most ideas sound good on paper but are far from applicable in the real world.

Despite what financial and technology experts may tell you, there is a lot more development going on in the world of FinTech outside of those two places, though. Neither place is a requirement to create a mainstream FinTech idea and see it come to life after a financial injection from interested parties. For all of the allure both London and Silicon Valley have, they may very well be overshadowed by other parts of the world in a few years from now.

The FinTech revolution is not centralized, but will take on a decentralized aspect, just like Bitcoin has done in recent years. This new business paradigm will allow anyone in the world to contribute to the greater financial good of the entire world. Whether that is with Bitcoin, blockchain technology, or something else entirely, the decentralization revolution is coming.

As a result of the decentralized nature of technological development, FinTech innovations are unique and diverse. Gone are the days where the financial sector was controlled by state institutions, as outstanding technology and ideal infrastructures are being created by people from all over the world.

European Cities Show A Great Interest in FinTech

It should come as no surprise to find out that Europe is warming up to new and disruptive
technological innovation. And the same countries that are embracing Bitcoin more openly are also the countries to drive FinTech innovation to new heights in the near future. All of the European cities with “dark horse potential” are capital cities of their respective countries, for obvious reasons.

Mobile commerce and smartphone usage for payments are seeing unprecedented growth in Spain. Record venture rounds are taking place in the city of Madrid, which is home to various FinTech companies -- including Coinffeine and peerTransfer. In fact, the Spanish Association of FinTech Technology (SAFT) was formed in Madrid earlier in 2015.

FinTech startups - just like Bitcoin startups - are facing a hard time navigating the regulatory and legislative requirements in Spain. This is in stark contrast to traditional Spanish banks’ eagerness to adopt new technologies. BBVA, one of Spain’s major banks, was the first to venture into the world of FinTech, which has also led the bank to explore options in the field of Bitcoin and blockchain technology.

A little-known fact is that the DACH region - Germany, Austria and Switzerland - is attracting a lot of FinTech funding in Europe. More particularly, Berlin is often referred to as a “startup capital” - or even “Silicon Allee” - as the city has a unique ability to bolster tech innovation in an efficient and quick manner. On top of that, Germany has a rich financial history, which gives FinTech startups a powerful weapon in their quest to disrupt the banking system as we know it.

Amsterdam is not only one of the Bitcoin capitals of the world, but it is also home to a massive FinTech startup ecosystem. With help and incentives from the Dutch government to create FinTech solutions, startups in Amsterdam have a leg up over other cities in terms of guidance and support. Plus, The Netherlands has a very straightforward tax structure that attracts a ton of international developers and companies.

Australasia Is Making Headway In The FinTech World

Other important parts of the world are Singapore and Sydney, both of which are making a lot of
headway in terms of FinTech innovation. Singapore government is pushing hard to bring financial innovation to the entire world in recent years, and revealed plans to inject US$166m in the growing FinTech ecosystem over the course of five years.

Most people in Asia are unbanked, which creates a lot of opportunities for disruptive financial technologies, like Bitcoin. In fact, Asia is the biggest Bitcoin market to this very date, as it gives people an option to use financial services without needing a bank account or credit card. According to unconfirmed reports, Asians will skip the entire - ATM and credit card generation - and transition to online payments right away.

Sydney, on the other hand, is a new face in the FinTech development race. That being said, there is a huge potential for Australia’s service industries as Sydney becomes a FinTech hotspot in the years to come. Being home to digital, professional and creative industries is a valuable asset to stimulate and bolster financial technology development.

Similar to Singapore, Sydney can count on support from the government in terms of FinTech innovations. Additionally, plenty of private organizations have pledged their support to this sector as well. The Asia-Pacific region is long overdue for financial innovation, and there is no more opportune time than now.

Bitcoin The Driving Factor For FinTech Innovation?

Even though FinTech innovation is not synonymous with Bitcoin in most cases, the underlying blockchain technology could prove to be a powerful ally for developers. WIth this transparent ledger capabilities, and instant transfer of funds from anyone in the world to any place in the world, the potential for this technology has yet to be unlocked.

As more and more companies and developers focus their attention on the FinTech sector, they will undoubtedly come across blockchain implementations at some stage. And as more creative minds attempt to harness that technology for the greater good of all of Earth’s population, it is hard to imagine a world where neither Bitcoin nor the blockchain will play an important role. 

What are your thoughts and predictions for the FinTech innovation sector? Let us know in the comments below!

Source: TechCrunch

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Bitcoin Could benefit The Six Pillars of Underbanked People

Bitcoin and digital currency are often heralded as “the tool to help the underbanked”. And even though there are several companies focusing their efforts on the underbanked, that term is being used quite loosely these days. But who are these underbanked people, and how could Bitcoin improve their daily lives? Let’s find out.

The Six Categories of Underbanked People

When people are talking about underbanked citizens, there are six major categories to distinguish between. Some of these categories may seem more or less obvious than others, but in truth, they are all valid choices. Underbanked does not necessarily mean they do not have a bank account, it can also indicate these people are using a financial infrastructure that is not providing them with enough options and support when needed.

The first category is perhaps the most obvious one, as far away friends and family are underbanked in their own right. In this day and age of modern technology, sending money around the world is still a tedious and cumbersome job. Not only does it take a while for the money to be cleared by banks, other solutions such as Western Union are extremely costly. Bitcoin is providing a far better - and more viable - alternative in that regard, and does not require a user to have a bank account or provide sensitive personal information when receiving funds.

Financial experts also claim that Bitcoin is something that will exclusively be used by millennials and young adults over the next few years. This statement is often criticized by Bitcoin enthusiasts, and some surveys have even indicated that Millennials aren't that keen on Bitcoin just yet. That being said, this demographic proves to be one of the most interesting ones to keep an eye on, as young adults have grown up with a suspicion of centralized authorities.

As a result, most people in this demographic have resorted to “other ways of life”, whether that is in the form of content consumption or overall lifestyle. Bitcoin could be on that list as well, depending on how the decentralization revolution plays out in the years to come.

One group of people that is often overlooked - despite many of us being among them - are the people affected by large and unwieldy amounts of debt. Some of these debts may stem from bad decisions, both in someone’s personal and business life, but the financial crisis is also playing a big role. Back in 2008 when the latest financial crisis hit, it affected billions of people around the world. And even though most of the world economies are no longer falling off a cliff, there are still lots of problems plaguing the current financial ecosystem. Especially these people could benefit tremendously from Bitcoin and its decentralized aspect, and more importantly, its transparent nature.

Residentially displaced citizens have seen the world as they know it being torn to shreds in a matter of minutes. Families who have lost their homes and everything they worked for their entire lives are relying on domestic and foreign aid. As we have seen in the past with the Red Cross, that foreign aid does not always reach its intended destination. Bitcoin could play a very important role in the lives of residentially displaced people. By sending a Bitcoin transaction, you are sure that the funds will reach the intended target, rather than trusting a middleman to deliver the funds to those who need it the most.

One of the key focal points of Bitcoin areas should be the emerging and developing economies. From a financial point of view, there is no better place to make a dent in the financial infrastructure than those parts of the world. Most of the population in developing economies is limited to an annual income of under U$13,000. It goes without saying that this amount is not only incredibly low, but it also means these people will have little to no access to any form of financial services. Once again, Bitcoin could be the most powerful to be introduced into the lives of people living in a developing economy.

Last but not last, oppressed nations are trying to get out from under the thumb of regimes and governments. Freedom of speech is a basic human right, but oppressed nations are not so appreciative of whatever opinion you may have. Furthermore, oppressed nations will have limited - or restricted - to no access to any financial means that are not tightly controlled by the government. Unregulated alternatives are usually the only other viable alternative, and Bitcoin should be on the top of that list in this regard. Borderless payments with little to no transaction costs, with no governmental oversight or restrictions, can be a godsend.

What are your thoughts on these six pillars of underbanked people, Let us know in the comments below!

Source: HolyTransaction Infographic

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