May 7, 2017
This week we look at the foundations of the FinTech ecosystem. From a global perspective, we are seeing many approaches to implementing FinTech. Each market has a unique combination of market maturation and the local regulator’s approach, making the next decade an interesting future case study.
It’s no surprise that partnerships, collaboration, and co-opetition are the sentiments du jour in FinTech. In Western countries, this seems more like an inevitability based on the circumstances, not a deliberate recognition that it’s the best path forward. While emerging economies, like China, seem perfectly happy to let consumer companies (ex: Alibaba) offer financial services which, in an e-commerce world, seems naturally better for the customer. As for the West, how do we get true competition in the marketplace? The EU is trying with PSD2 but what about the US? A friend of mine likes to say entrepreneurs either want to be rich or to be king. Increasingly, it seems like the US needs a FinTech CEO who wants to be king and build a true competitor to the large incumbents.
A lot of fiat currency has funneled its way to cryptocurrency (bitcoin, Litecoin, Ripple, BitFinTechTheriumcoin) – okay, I made that last one up. Regardless of why (Trump, Indian demonetization, continued Chinese RMB outflow), it’s interesting to think about the future of safe or better currency. The USD has served as a safe harbor; however, will cryptocurrency finally provide a digital safe harbor outside the traditional geopolitical lines? Or will the consensus model of cryptocurrency stymie its technical growth, leaving it beholden to its own internal politics?
Theoretically, you’d think that all regulators would love the option of having a national, transparent, and immutable record of the financial services industry. This sounds so idyllic that you can understand why someone would advocate for a comprehensive FinTech and RegTech plan to efficiently deploy DLT. It seems unimaginable that any administration (even more so the current Trump administration) would not enact such a plan. DLT (among new tech) is making it possible to have such a system. Doesn’t a more efficient, more accurate, immutable, less-costly system sound like a small government dream? Well, I’m not holding my breath based on the current fights between federal and state regulators. The next decade will provide interesting evidence on the impact of FinTech progress. On one hand, we may regret letting new technology take over such a vital societal system; on the other, what is the opportunity cost of regulators holding back a more frictionless FinTech future?
We plan on sharing several articles each week. Tag @letstalkpayments on social media if you think there is a ‘must read’ from the week!
See you next week!