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Financial Technology or “FinTech” is the buzzword doing the rounds in the media and technology circles these days. FinTech is fundamentally changing the way financial institutions do their business, helping create innovative financial services solutions across the B2B and B2C segments.

FinTech is a disruptive technology that is applied to the financial services products and services such as fundraising, asset management, loans, money transfer, and mobile payments. For example, with the help of FinTech, investment management is undergoing a major change in the decision-making process. Investors are now using user-friendly platforms to make their investment decisions. Some of the FinTech platforms in the US are Wealth Front, Betterment and Covestor that offer clients a wide range of services such as automated investment services in ETFs, online financial advisory services, and online investment management services. Using these platforms, investors can have online access directly or through respective Apps to the offered financial products and services. Investors need to update their risk profile, based on which allocation of their assets is done, thereby making the process transparent and minimizing cost to a large extent compared to the traditional way of investing.

One of the FinTech innovations that are creating waves across the financial sector is mobile phone apps that are encouraging users to save money. For example, Moneybox educates users on managing money with healthy spending habits, and offers simple investment options and saving advice.

According to the World Bank, currently around 2 billion adults globally do not have access to financial services. FinTech can help banks tap this huge untapped market. As a step in that direction, FinTech firms and banks are working together to deliver innovative solutions to their clients. Considering the huge potential offered by the sector, bankers believe that FinTech firms will dominate the future landscape of Banking.

Financial service providers like banks, insurance companies, NBFCs, wealth managers, asset managers, and stock brokers are increasingly looking at and adopting FinTech to enable them to optimize their capabilities and manage the needs of their clients across different verticals. The world-wide investment in FinTech increased at a CAGR of 65.5% to USD22.3 billion[1] over 2010-2015. The growth in investment has been primarily driven by the US, Europe and APAC regions. Notably, the Asia-Pacific region’s share in total investments has increased from almost negligible in 2010 to c.13% in 2015. The rise in global investments has been on account of the rise in the number of investment deals as well as of the deal size. While the total number of deals globally has increased from 338 in 2010 to 1,108 in 2015, per deal value has increased at a CAGR of 30.6% over the same period to reach USD20.1 million in 2015. The increased adoption of FinTech continued in 1Q 2016 with investment increasing by 67% y-o-y to USD5.3 billion.


[1] Accenture analysis on CB Insights data

Exhibit 1: Global FinTech Investments


Source: Accenture, CB Insights


As per Financial Technology Partners, an investment bank focused on FinTech, around 73% of the investment in FinTech has been made towards companies in the banking, payments and ecommerce, and capital markets segments; however, as per fund allocation, c.92% of the fund investment was towards the payments and ecommerce, and banking sectors.


Exhibit 2: FinTech Funding by Sector
(funds raised)

Exhibit 3: FinTech Funding by Sector (number of companies)

Source: FT Partners; *by the number of companies (Jan 2016 data)

With this article, we initiate a series on FinTech wherein we will cover in depth various technologies that have been introduced and are making waves in the financial services industries. Here is a snapshot of these technologies.


   Robo Advisors

  • Uses algorithm-based automated software to provide advisory and wealth management services

   Big Data and Analytics

  • Involves analysis of very large sets of data to find business insights via identification of patterns and trends

   Quantum Sealed Envelope

  • Provides confidentiality, authentication and integrity of information across the business processes through encryption followed by decryption across information systems

   Artificial Intelligence and Natural Language Processing

  • Involves developed computer systems that replicate human tasks such as decision making, language conversion, speech acknowledgement, etc.

   Automation in Equity Research

  • Enables generation of reports, event update notes and data analysis at a much faster pace than delivered by the analysts manually

   Bitcoin and Blockchain

  • Bitcoin is a decentralized form of digital currency, created and held electronically
  • A blockchain is a public ledger of all Bitcoin transactions that have ever been executed and stands as proof of all the transactions on the network

   Cloud Computing

  • Involves using a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer

   Payment Banks

  • Includes transfers and remittances through mobiles and smartphones

The adoption of new applications and capabilities is proving to be beneficial for the financial services providers as well as customers. While the financial services companies have benefitted in terms of better competitive advantage, lower costs, improved efficiencies and higher customer satisfaction; the customers have gained in terms of better and quicker management of services using newer channels. However, no change comes without a cost. While FinTech has introduced efficiencies in operations, it has also resulted in job cuts due to lesser human requisite. Moreover, application of a technology is not always feasible across services, and it also makes the system vulnerable to cyber attacks.

The financial sector is poised to benefit from the innovative FinTech solutions that are likely to bring a dramatic change across the sector by reaching the unbanked. Nevertheless, we believe the advantages of FinTech outweigh the disadvantages to a large extent. Technological change and enhancement in the financial services industry is inevitable. We believe FinTech will gain prominence over the next decade while the industry seeks solutions to resolve the issues that crop up during its implementation. We will analyze and discuss the benefits and implications of each of these technologies separately. Watch this space for our next write-up in the series, ‘Technology Wave across Financial Services’ where we will delve upon ‘Robo Advisors’ and their role in the fast-changing financial services industry.


Nikhil Loharuka, Senior Director – Financial Research
Financial Research
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