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What is FinTech? “Democratization of financial services” and ”Technology Supremacy”

The protagonist of FinTech, which subdivides the functions provided by current financial institutions and uses technology to automate, realizes low-cost and high efficiency, is a new venture. On the other hand, financial services that were limited to serving the affluent class in the past have also moved towards democratization.

The relevant description of the blockchain led by Bitcoin has been described from various aspects so far. The world is paying attention to the blockchain that goes beyond the scope of the country and practices thorough democracy, and it will become a major trend in FinTech.

However, the so-called FinTech, literally, is the abbreviation of Financial Technology, covering a wide range of fields, so the technology used is not limited to the blockchain.

FinTech applies the evolution of IT to all kinds of financial services, eliminates "non-efficiency" as much as possible, and solves the problem of speed, so that users can use the service cheaply and conveniently.

“Democratization” of financial services

In my opinion, the essence of FinTech is to replace the work performed by human beings with technology. As a result of the cost reduction, all kinds of financial services that were only available to the wealthy class from before to now have become available to the public. In other words, the "democratization of financial services" has been achieved due to the technology. I think this is the biggest advantage.

The advantages of automation not only lower the cost, but also extend convenient tools to the public. For Robo-Advisor, who is not afraid of fatigue, whether it is only limited to the asset management services provided to customers with total assets of more than 10 million dollars or targeting people with annual income of millions of dollars. The customer groups are fully coped with. From a corporate perspective, in the past, only people near the top of the pyramid could be targeted, but now it can be extended to include people at the bottom.

Even if we look at the example of the United States, it is not the current financial institutions that affect FinTech, but the overwhelming of start-ups. Today's financial institutions are just about to start adopting new and cheap services, but they infringe on existing services that are already in operation (although high prices can be profitable services), which means they are caught in an "innovative dilemma" and cannot move.

On the other hand, start-up companies cannot compete directly with large financial institutions. Therefore, banks or securities companies subdivide a set of services previously provided (this is called "unbundling"), which will be specific to one function. The services are provided to customers at low cost and with high efficiency. For example, in the bank, the savings function or settlement function, transfer function, etc. are concentrated, but compared to that one function after another, most start-ups adopt services with better actual usage.

Many of Hong Kong fintech start-ups are based on the so-called "time machine management" model. For example, asset management, wealth management robots, or accounting apps, which we will introduce later, were first based in Silicon Valley. Achieved, a service that has developed steadily, appeared in Hong Kong a few years later. Although it is not so refreshing, it does hold the needs and has an easy side to get on track.

The services that were first launched in the United States, after fierce competition with rivals for survival, through IPO and M&A (mergers and acquisitions), will be evaluated at the amount that can be seen in the "market value", so similar services in Hong Kong. Compared with it, it should not be too different. Such predictions are easy to establish. It can be said that the environment for easy investment in venture capital is already in place.

"Technology Supremacy" that trusts machines more than human

The fundamental view of financial technology is that if the work performed by humans so far is automated and completely de-intermediate using technology, the same performance can be achieved at a very low cost. Therefore, current financial institutions subdivide the integrated and operated performance, and use IT to practice one by one.

Finance is a business that makes the difference with the monopoly of surplus and shortfall of money. It is because of its irreplaceable position that it takes a lot of manpower to confirm one transaction after another. In a sense, it can be said to be an extravagant way of doing things that has always been allowed. However, if financial technology can be used to achieve this efficiency at a low cost, then current financial institutions may also become unable to continue to pay the current high personnel costs.

In addition, behind the financial technology, there are ideas that should be called "Technological Supremacy". The so-called "Technological Supremacy" means that it is more trustworthy than using it based on human judgment, rather than using it according to the fixed rules of an algorithm. Since humans make mistakes and do evil, systems that exclude humans can be trusted, and this is a value that hates blockchains that are managed by specific countries or companies.

However, the blockchain based on a decentralized network also has an inefficient side. This is because, compared with all employees connecting to the Internet to confirm transactions, centralized processing with a centralized server is more efficient.

Regarding this point, a system with a server in the centre can complete the processing, so it has the advantage of fast processing speed and easy to update or use. Some people think that it is more reassuring if even managers have implemented them well.

This is the case with the current banking system. And if the server is shut down due to an unbearable load, this is a credit issue, and it will cost billions of dollars to obtain backup support. This will increase costs, but the cut costs are also limited. This is also the reason why the nature of banks' high costs is not much improved.



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Ivan Tsang

Ivan Tsang

Head of Corporate e-Banking

Fubon Bank

Member since

23 Jul


Hong Kong

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