Fintech refers to the virtual currency, also called cryptocurrency that changes hands over a blockchain ledger. A growing number of users prefer it to bank transactions, but critics say that fintech will collapse for the following five reasons. Each of these is a myth.
The dot.com crash was one bubble. Critics say fintech will be another and that it is doomed to crash. Wrong. As of January 2017, the world has more than 35 billion-dollar-valued fintech companies that are predicted to grow from US$3 billion to US$6-8 billion by the end of the year, according to FinTech Business. Moreover, blockchain has influenced almost all segments of finance from banking to remittance and contracts. This is no passing fad.
There is no such battle. Instead, a growing number of banks are collaborating with fintech since they see fintech as the wave of the future. A recent 2016 Accenture study found that 80 percent of banks in London see working with fintech startups as a lead-in to the business opportunity. Sixty percent of these incumbent banks were ready to spend significant capital to testing fintech potential.
Government regulations are infamous for curbing innovation and fintech is no different. Fintech deals with this by cooperating with government authorities and by lobbying to help fintech deal with challenges. This cooperation helps the blockchain industry win government assistance and helps government-certified fintech providers win more business.
Some say that fintech is an elite movement that largely or only touches superpowers such as Hong Kong, Silicon Valley, New York, and London. Far from it. Fintech influences lower-level markets all across the globe and is credited with helping third-world countries transfer money where few or no resources existed. Emerging markets such as southeast Asia, Africa, and Latin America are starting to gain traction, by launching fintech startups in regions that lack the traditional banking system.
Critics say that although fintech may offer valuable service, its advantages are limited to loans and transactions. The World Economic Forum shows that fintech offers far more. The report finds that 80% of fintech companies also deal with insurance, market provisioning, investment management, and capital raising. On top of that, fintech also saves money and time and maybe a much better financial fraud detector than are banks.
Critics like to doom fintech to a dismal future, but data shows otherwise. Far from a being a chaotic bubble, fintech is highly regulated, deals with a diversity of financial aspects, reaches remote markets, and collaborates with banks and financial industries to provide secure, effective and cheap service.