Financial Technology (FinTech) is disrupting traditional payments systems by offering consumers financial products more efficiently and at lower cost. These new services also could give the two billion unbanked people worldwide a chance to enter into the global payments system.
PwC estimates that cumulative investment in FinTech globally could exceed USD150 billion within 3 to 5 years, and that over 20% of financial service businesses will be ‘at risk’ from FinTech companies by 2020.
So, how is the global financial marketplace responding to this potential disruption? ITU News looks at two key global events from the past month to see FinTech’s impact on the industry and people using these services.
Nigeria’s first FinTech bank
SunTrust Bank Nigeria recently launched Nigeria’s first financial technology bank. Charles Onyema Ugboko, Chairman of SunTrust Bank Nigeria, explained that the bank’s target was to bring financial services to the 40 million unbanked people in Nigeria. By moving away from physical branches to an online-driven platform, SunTrust Bank Nigeria’s services are available 24 hours a day from anywhere in the world – a move that will help the country harness the full potential of the digital world, according to Mr. Dangote, President of the Dangote Group and Africa’s richest man.
Africa’s infrastructure challenges are a key driver for digital acceptance in the region. “Just as millions of Africans jumped from owning computers to buying smartphones […] a lot will prefer internet banking to avoid traffic for example,” writes journalist Afolake Oyinloye.
However, Oyinloye also notes that with the rise of FinTech companies, there may be no need for the unbanked to get a bank account.
PayPal’s success in the region is a case in point. In just two years, Nigeria has become PayPal’s 3rd largest mobile e-commerce market, expecting USD 819 million in transactions by end 2016. “African banks will have to improvise be part of the new banking sector,” Oyinloye wrote.
Singapore: supporting FinTech innovation through regulation
Singapore recently reformed its monetary laws to regulate both traditional and innovative payment businesses under a single piece of legislation. The move is aimed to promote FinTech innovation as Singapore pushes to become a major FinTech hub.
“FinTech is changing the face of payments…. It is not efficient for companies to be regulated under two pieces of legislation which were not written with the FinTech solutions of today in mind,” Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS) told Reuters.
The reforms will allow MAS to address specific issues including access and corporate governance, promote consumer protection and strengthen cybersecurity. In addition, a new National Payments Council (NPC) will be established to promote innovation and collaboration in the payments industry.
Clearly defined regulation can help stimulate the FinTech environment through improved consumer trust, and the move aims to support Singapore’s ‘smart nation’ plans. “It is envisioned that activity-based regulation of payment service providers would build public confidence and encourage the use of electronic payments,” Menon said.
ITU News / Lucy Spencer
NOTE FROM ITU: Learn more about the work of ITU-T’s Digital Financial Services Focus Group.