Disruption is one of the biggest hype and buzzwords in the market right now. Every start-up armed with nothing more than a landing page and a whitepaper considers itself disruptive. Any new business that can manage to include the term “disruption” in its tagline gets free press coverage about its potential to displace legacy systems and incumbent traditional players.
However, there’s nothing inherently wrong with being a disruptor – the financial industry is built around the idea that the world must always find efficient ways to move money around. From trade by barter, to gold coins, to bank note, fiat, and now digital currencies – financial services are constantly evolving.
In 2017, Christine Lagarde, Managing Director of the IMF in an interview with CNBC on the side lines of IMF Annual Meetings in Washington D.C. “I think that we are about to see massive disruptions” in the global monetary and finance sectors. This piece looks at 5 emerging trends that can actually trigger disruptions in the financial services industry.
For those who aren’t familiar with what cryptocurrencies are yet, it is advised to learn since they are perhaps the most polarizing concept in the fintech industry right now. On the one hand, some people believe that the very decentralized nature of cryptocurrencies makes them the perfect solution to halt the irresponsible monetary policy of governments and its agents. On the other hand, some people believe that cryptocurrencies are probably a scam because money should not exist outside the control of governments.
Irrespective of your views, there are very high chances that cryptocurrency is here to stay. Of course, cryptocurrencies are still in infancy – there’s room for evolution, standardization, and (maybe) some regulation. The singular fact that cryptocurrencies engender near-instant peer-to-peer transfer over a secure network is a strong selling point. More so, mainstream traditional banks have taken customers for granted for far too long with bank charges and different kinds of transaction fees.
As cryptocurrencies start to take center stage in global financial and economic discourse, banks might need to ramp up efforts to include services for cryptocurrency in the future plans. However, if governments start issuing cryptocurrencies alongside their fiat currencies, the direction of the discourse might take a very dramatic turn.
Money transfer apps
Money transfer solutions designed to perform some of the functions of retail banking have been around for quite a while. Services such as PayPal have been used for sending money without necessarily needing to go to a bank for many years even before the advent of apps. Now, the proliferation of smartphone, apps, and the readily accessible Internet is promoting the birth of new money transfer services.
With payment apps such as SquireCash, Venmo and PayPal, people can now connect their bank accounts and credit cards with the apps to make money transfers without the high-charges and delays of banks. Interestingly, the payments industry is growing rapidly and now, the money transfer discourse is moving card-less devices such as Apple Pay and Samsung Pay as devices become instruments for making payments.
Social media firms such as Facebook, WhatsApp and WeChat are also coming up with solutions for making payments via messaging apps without needing to open a dedicated payments app. Economists estimate that the global mobile payments markets with reach $3.4 trillion in the next five years, retail bankers will need to find ways to position to embrace the inevitable shift to digital payments.
Not all fintech innovations are disruptive by nature because some fintech ideas are probably solutions in need of a problem. However, for the most part fintech innovations serve as catalysts for change to usher in a higher form of efficiency in the financial services industry. Traditional stakeholders in the retail banking and finance industries tend to be conservative and averse to change. However, the arrival of Start-ups intent on challenging the status quo often forces them out of their lethargy and the customers ultimately benefit as the industry becomes more efficient.