Our third YOLK event turned its attention to the finance world as we gathered some of the industry’s brightest decision makers in a room to talk currency, payments and security, and how the industry is feeling the force of disruption and change. With a panel of experts assembled - and breakfast bagels in hand - we kicked off with a look into changing consumer financial needs and where banks are falling behind, before musing over cryptocurrency and how the Chinese have adopted mobile payments at such a rate that there’s no need to carry a wallet anymore.
How we got here
Traditional banks aren’t keeping pace with changing consumer preferences. This has opened the door to the fintech upstarts, whose disruption factor complements traditional banking services, making customers’ experiences more streamlined and intuitive. These brilliant minds are out there working on solutions that save time, money, paperwork and spreadsheets, while eating away at old banking business models.
At the moment, the world’s money-holding vessels are still the major banks, but one change of who holds the gold and these longstanding institutions could be in trouble. For example, not long ago PayPal was simply seen as a small fry platform that didn’t stand a chance of taking on the world. In 2017 it’s posting US$106 billion payment volume per quarter.
Cashing in… or out?
So what are the big disruptions on the horizon for the finance industry? A cashless society seems to be a ‘someday’ certainty: WeChat Pay has already taken over Chinese market, introducing mobile pay back in 2013 and since racking up over 600 million active users storing their banking information in the app (for context, that’s 21% of the most populous nation on earth). Chinese consumers are using WeChat Pay for a broad spectrum of purchases and transactions: from food stalls to shopping malls, utility bills and even loans, all by scanning QR codes through their mobile phones.
Helping turn China into the biggest mobile payment economy in the world, WeChat has managed to rack up a 15.7 trillion yuan estimated market worth (AU$3 trillion), recently entering Silicon Valley with a multi-organisation partnership which now allows traders on the Stripe startup platform to accept Chinese payments. It’s even expanded into the European market, striking up a partnership with major European mobile payment processor Wirecard to allow Chinese tourists to make payments while travelling overseas.
Get in, we’re going shopping
For retailers, this new payment method doesn’t seem to pose a problem. Ultimately, shoppers’ transactions are all about trust; vendors will accept a credit card or any alternative forms of currency as long as the payment issuer is going to settle their accounts. Case in point: you can now buy Hoyts cinema tickets with Qantas points.
Plus, these cash alternatives remove a certain need for safety from the merchant, since they no longer need to carry as much cash in premises, nor transport it to the bank. And lastly, new ways of transacting are opening up new, personalised opportunities for managing cash flow - settling up Qantas points every Friday, for example, if it so suited. Boiled down, cashless payments boast a combination of speed, security and trust for all parties.
And what’s all this about the blockchain?
If cashless payments offer more security, the Bitcoin blockchain is the daddy of digital transaction safety today - replacing the ‘trust’ aspect of bank ledgers with cryptography. The clue to understanding the blockchain is in its name: blocks of digital information stored on a chain. It constantly grows with more ‘completed’ blocks - each containing a link to a previous block, timestamp and transaction data - in a linear, chronological order that can’t be changed.
This chain of cryptocurrency information then serves as an open, distributed ledger - typically managed by a network collectively adhering to a protocol for validating new blocks - which records transactions between two parties in a verifiable and permanent way. Once recorded, it’s impossible to retroactively alter the data in any given block without changing all subsequent blocks. The sum of this is that the blockchain makes digital financial transactions a whole lot more secure against hackers.
All the gear, but no idea?
With security and speed on its side, fintech is giving traditional banks a bad name. Those looking to get a mortgage, for example, are still experiencing a painful process that takes too long and involves too much paperwork. Fintech players are simplifying and speeding up the day-to-day chores that no one really wants to spend extra time on, which is really the holy grail of disruption. As consumer trust grows in technology devices, mobile phones and the digital world, so does Australia’s fintech business.
And so a conundrum presents itself: on one side we are seeing an influx of startups and innovative thinkers with no funds to turn their solutions and ideas into reality. And on the other, enormous financial companies with big balance sheets and money to spend are really struggling to embrace the onward march of the digital age. The next chapter for fintech will be about pushing these two sides of industry to collaborate, with everyone bringing their own value to the table.
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