Technofinance, better known by the term Fintech, presents itself as an emerging market that brings with it two elements in strong contrast with each other: a real threat to the traditional banking sector and, at the same time, an inexhaustible source of opportunities for new and old players in the financial market.
Today, the Fintech companies, that bring technological innovation in the financial sector, are in direct competition with the banks, since the transactions, payments, financial intermediation, risk management and electronic currencies they supply through the most advanced and sophisticated technologies, are substantially on the same playing ground that those of the traditional finance. Only the technological solutions adopted to win the match, are different. While the hi-tech giants like Apple and Amazon are already entering the Fintech world, along with new players with a high rate of innovation, traditional banks often struggle to keep up due to rigidities in regulations and their own internal structures.
To drive this trend, it is an increasingly strong orientation of consumers and companies to turn towards this type of financial instruments. According to a research conducted by the data provider CB Insight, financial technology companies have raised a record $ 39.57 billion from investors globally in 2018, up for 120% from the previous year. The research also shows that the investment of $ 14 billion in Ant Financial’s, the subsidiary of the Chinese giant Alibaba dedicated to payments, accounted alone for 35% of the Fintech’s total financing in 2017.
And it is precisely China that shows a particular affinity with the Fintech sector. Affinity, that can be explained, at least in part, by the difficulty of accessing standardized credit for small and micro businesses. Traditional banks, in fact, are inclined to approve loans only to large state-owned companies, which are able to ascertain their own payment capacities. On the other hand, thanks to their close links with the Chinese technology giants, the online loan providers My Bank and Webank can count on large amounts of data from online transactions or social networks, thus providing an innovative service to about 89% of Chinese private companies that could not access credit through a traditional bank. The value of information, once concentrated in the hands of financial intermediaries, thus passes to companies capable of acquiring and managing huge amounts of data generated by users themselves.
Although investments are concentrated mainly in America and Asia, even in Europe the Fintech sector is reaching record financing. In the old continent, London remains the capital of technofinance, despite the fact that the instability brought by the Brexit has generated new ecosystems in Germany, France, Israel and in the Scandinavian countries. In Italy, where 95% of payments are still offline, the American Stripe, one of the largest B2B platforms, is focusing on digital payments for SMEs. The push towards digitalization also comes from politics, which aims to discourage the informal economy by compressing the use of cash. An example of this is, in Italy, the introduction of electronic invoicing which, in addition to encouraging the legality of payments, also brings greater certainty about timing and methods.
Fintech companies are often focused on just one service, but they touch all areas of finance: from payments to loans, from insurance (InsurTech) to banking and asset management, to the use of technological tools to support adjustment procedures, compliance, regulations, laws and reporting (RegTech).
The technology applied to finance has undoubtedly improved the services provided to customers, profoundly modifying our interaction with money and at the same time making companies more efficient. Given the speed with which both the technological and the services panorama is changing, it is not easy to venture forecasts on future developments. Among the trends to be monitored in the coming years to imagine possible evolutions of the sector, there are certainly the blockchain, artificial intelligence, biometrics and Open Banking, an initiative promoted by some governments to aggregate financial information and encourage a fairer and more transparent banking, defined by the Financial Times as ‘the quiet digital revolution’.
Also in the field of investments, technology is allowing a continuous lowering of entry barriers. Robot consultants such as Nutmeg, WealthFront and Acorns, or crowdfunding platforms like Crowdcube and Funding Circle, are in fact paving the way for many people interested in multiple alternative investment opportunities.
“Technological innovation will profoundly change the structure of the financial market and only by fully understanding the digital innovations will it be possible to survive and compete with the new business models,” says Emanuele Bajo, Director of the Master in Finance and Fintech of Bologna Business School. The traditional financial institutions and Fintech startups therefore need new professionals in order to transmute the digital transformation into a competitive advantage. “There are many Fintech companies looking for young talents. The experience is not so important, it is about the will to learn, the passion to make a difference, the desire to build the future,” explained during the Innovation Talks at BBS Candice Koo, the Co-founder and Managing Director of the online payment platform CANCAN Global Payments & Promotions.
To seize these opportunities and face the challenges offered by the digital era, the BBS Master in Finance and Fintech trains young professionals capable of combining traditional financial skills with in-depth knowledge of new digital solutions and applications, to become the point of reference and link between the management and the computer scientists.