19 Oct'17

Fintech DTCC report – could technology damage global financial markets?


DTCC released a report this month on the fintech industry; technology innovations that affect the financial services. (Editor’s note – I have been banned about making jokes around jet packs for fish everytime someone says fintech).


DTCC are ‘responsible for protecting market stability and ensuring the integrity of the global financial system.’


The key findings in the report include:


    • Investment into fintech start-ups has increased. DTCC found that the total global investment in 2016 was is $25 billion, which is an increase from $9 billion in 2010


    • It is too early in the fintech revolution to determine whether their impact will be harmful or beneficial to the financial ecosystem


    • Due to the fact that fintech innovations are likely to continue to develop quickly, these developments will be monitored closely (Great job there guys – maybe grab some popcorn and get a new game to play on your phone whilst monitoring things?)



In the ‘Growth and Drivers’ section of the report, DTCC state that the fintech industry is mostly made up of starts-ups, rather than established technology companies like Google and Apple.


WIRED published a feature on eight fast-growing fintech start-ups who presented to a panel of three judges as part of the WIRED money startup stage competition.


Curve were crowned the winners; a digital wallet platform that combines all bank services used by an individual into one platform that can accessed via a Mastercard.  The Curve wallet allows individuals to pay for anything globally with the option to change the card that they were charged on within 14 days.


The Financial Times are also hosting a ‘Future of Fintech Awards’. They have shortlisted 10 companies, and the winner will be announced on November 30th.

One of the ten contestants is called Funding Circle. This is a lending platform that connects investors to borrowers. Over £3 billion has been lent, it holds more than 60,000 lenders (some of which are large lenders such as, British Business Bank) and there are 24 000 small business using Funding Circle.


Forbes published an opinion article from Rohit Arora, a financial professional, about the fintech industry. Arora is of the opinion that ‘FinTech is thriving because it greatly expanded access to capital to small business owners, including women, minorities and immigrants, who were under-served before technology leveled the playing field.’


Arora gives three reasons why he believes fintech companies are ‘thriving’, which directly challenge Chris Meyers’s three reasons for why fintech is a failing industry.


Meyer believes that technology and finance is incompatible because ‘finance is a slow-moving sector’ while technology is not. In response, Arora states that although banks are slow, there is a demand from investors for a quick service. Arora adds, the fact that traditional financial services are investing in technology is evidence that financial technology is becoming more mainstream.


The second reason Meyer discusses is the increase competition that forces fintech companies to make riskier decisions. As a result, loans are more unstable and less desirable. However, Arora is of the opinion that while fintech companies are under pressure to keep earnings afloat, those that are run efficiently will survive. The ‘nature of capitalism’ Arora sums up.


From his experience working with banks and financial organisations, Meyer’s final reason for the failure of the fintech industry is that finance is highly regulated, and one that does not highly reward innovation. Yet Arora states that finance must change because that is what the ‘marketplace is demanding’.


After surveying 1,308 financial services and FinTech executive, PwC found that 82% of financial services expected to increase FinTech partnerships in the next three to five years.



Image Credit : ‘Fintech, Technology and Finance’ by CafeCredit.com on Flickr. Licensed by CC by 2.0