Fintech, Banking Industry Disruption and Financial Inclusion
As blockchain-based technologies gain in wider use, the financial services industry may undergo a disruptive change.
A Blog Article by Pablo Markin.
As Shu-Han Chang and Chien-Ping Shih argue in their paper on “[t]he influence and application of artificial intelligence & blockchain on financial service[s],” published on December 19, 2018, “[t]hrough mobile payments, cloud platforms, and artificial intelligence, the [blockchain] technology […] has gradually penetrated into the financial industry” (45).
At the same time, the alternative financing sector based on fintech in China consistently outperforms those of the United States and Europe combined in terms of its transaction value. In 2018, China, United States and Europe have registered blockchain-based transactions to the amount of 4.8 billion USD, 1.4 billion USD and 1.8 billion USD respectively. In a wide range of developed countries and emerging markets, between 2017 and 2023 blockchain-based financing sector has been estimated to exhibit an annual growth rate ranging from 9.5% in the United States to 32.4% in Italy with China slated to become a global leader in this sector by the end of this period, as a recent Statista (2019) report suggests.
For this reason, fintech receives increasing scholarly attention, such as in a recent book by Pranay Gupta and T. Mandy Tham on Fintech: The New DNA of Financial Services published by De|G Press, an imprint of De Gruyter, in December 2018, which delineates various aspects of fintech as a development that is likely to lead to a significant disruption of the financial industry. As this book indicates, fintech has become a global phenomenon with relatively high rates of consumer and investor adoption, due to its uses for digital authentication, workflow automation and banking functions.
One can argue that the rise of fintech has been facilitated by the aftermath of the 2007-2008 financial crisis, as Gary Robinson in his 2018 review of Global Finance: Places, Spaces and People, a book by Sarah Hall published by Sage in 2017, tentatively proposes, since fintech has emerged as the cross-section of the financial sector and blockchain technology. Yet, as Robert Guttmann and Cédric Durand indicate in their interview that has appeared in the Fall, 2016, in Revue de la regulation, fintech continues to be surrounded by regulatory uncertainty, which is likely to limit its disruptive influence on the banking industry.
Nevertheless, as Cyril Fouillet and Solène Morvant-Roux note in their article on “[f]inancial inclusion, [as] a driver of state building in India and Mexico,” published on October 1, 2018, in International Development Policy | Revue internationale de politique de développement, fintech may be one of technological solutions, which can be expected to contribute to the financial inclusion underprivileged populations in developing countries and emerging economies, especially when combined with mobile phone applications.
By Pablo Markin
Featured Image Credits: AM18 Indonesia – The Bali Fintech Agenda, Indonesia, October 11, 2018 | © Courtesy of Ryan Rayburn/IMF Photo/International Monetary Fund/Flickr.