What are the underlying principles driving innovation in Fintech? The same, identical, unchanged principles that drive innovation of tech in general. Nothing new! It's just applied to Fin.
We all know what those principles are. We've become used to them as wave after wave of improvement washes over the devices and services we use every day. In normal, physical things the changes are dramatic, going from literally using horse-power:
To steam-powered engines on rails:
To jet-powered planes that fly us in the sky:
Compared to last year, things get: faster, cheaper and better. That's it!
But when electronics and software are involved, as they are in most of fintech, the rate of change is even greater. That's why most of the disruptive changes we see in fintech are little more than fintech catching up with other sectors that have pioneered and are already using the technology. Like for example, "gee, people seem to like their smartphones. There are an awful lot of them out there. Maybe we could figure out a way to put the tech in fintech; maybe build an app or something?!"
What this amounts to is simple in principle, though often challenging in practice.
So how does faster, cheaper, smaller/better underlie innovation in fintech? The main ways include:
Replace physical objects large and small with digital
This reduces cost and speeds things up.
Devices instead of places
Don't go to a place (which is expensive to build/buy, maintain and staff), use your computing device. Call up the specific banking-like function you want on your device, and get your job done, right now. Consumers prefer it because it eliminates travel time, wait time and hassle. For example, money transfer with Abra:
Replace people with data and algorithms
This reduces cost and speeds things up. Consumers prefer it for the same reason they'll use an ATM even when human tellers are available. Don't make an appointment, get dressed up and see the loan officer at the bank; enter your data in the loan app and get an immediate decision with immediate access to the money. For example:
Summary:
- Use the device you have to get the job done.
- Eliminate the man in the middle; no people.
- Digital beginning, middle and end.
Result: faster, cheaper, better!
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