• Malikkhan Kotadia, Mentor at The FinLab Pte Ltd


• 13.10.2016 08:30 am
Fintech

In my talks and panel discussions across the region, a key question invariably asked is: WHY NOW? What's so different or special now that everyone is going ga-ga over Fintech.

Here I will attempt to demystify it:

• The first thing to remember is that FinTech ISN'T a NEW phenomenon. Infact, it has been around in some form or fashion since the '80s. It just wasn't so sexy or glamorous then!

• So, what's DIFFERENT? The below mentioned factors factors, which have created a unique 'cocktail'. Showing them again:

1. Trust deficit since 2008: If you thought it's a thing of the past, look again. From the Wells Fargo issue to the Deutsche Bank challenges, the ghost just won't go away!
2. Moreover millennials have radically different notions of trust and brand affinity. Their social network determines trust, not a 200 year old institution!
3. Bad CX: How many of us have cursed our bank or insurer, or atleast had a bad experience? Till now, we didn't have options, but now fintechs give us a plethora of choices.
4. Three key factors drive CX:

• Speed: Imagine an incumbent saddled with a 30-40 year old legacy platform vs a challenger building it on completely new railroads. Banks take days for remittances; newer fintech players built on innovative models and railroads can do it in minutes!
• Convenience: AS-400 and multiple systems vs. an API based platform using blockchain for money transfer and AI for personalization... is it even comparable?
• Cost: High fixed costs and overheads vs a modular architecture built on PAAS/IAAS/SAAS!

Given these factors, it's no surprise that 4 out of 10 FI innovators are non banks! Expect to see many more in the coming years...

5. Exponential mobile growth: This is not only leading to newer business models like P2P payments in millennials, but also driving financial inclusion of the 2 billion un(der) banked.

6. Private funding: Low Fixed cost models combined with $ 30 billion in venture funding means thousands of fintechs can see the light of the day. Most likely, 99% will die!

Yet 1% of approx 12K fintechs means over 50-100 great success stories!

No wonder this threat/opportunity (depending on how you perceive it) is REAL..