Fintech and the future of finance | Prof. Arman Eshraghi | TEDxCardiffUniversity

Summary

The speaker provides a comprehensive overview of the FinTech revolution, highlighting its rapid adoption and disruptive nature. They discuss how FinTech innovations like blockchain, mobile banking, and robo-advisors are transforming finance globally, much like the evolution of mobile phones. The speaker emphasizes the balance between excitement over FinTech's potential and caution against market hype, using examples such as speculative bubbles in cryptocurrency. They conclude by stressing the importance of staying optimistic yet grounded in the real impact of financial technologies.

Takeaways

• 📱 The rise of mobile phones: Less than 1% of the world had mobile phones in 1990, but now mobile technology has reached near full adoption in under three decades.
• 💻 FinTech is not new: Innovations like ATMs and credit cards were early forms of FinTech, but rapid advances in recent years have made FinTech more pervasive.
• 🔗 Blockchain explained: Blockchain is a distributed ledger technology that enhances security by syncing multiple copies of data globally, allowing for innovations like digital currencies and contracts.
• 💰 Disruption across finance: FinTech is reshaping industries like banking, insurance, personal finance, payments, and capital markets, making processes more accessible and efficient.
• 📊 The rise of FinTech unicorns: As of 2018, there are over 40 private FinTech companies valued at over $1 billion, highlighting the rapid growth and influence of the sector.
• 🌊 Tech vs. Finance: The battle between Big Tech and Big Finance is intensifying as tech companies like Apple and Amazon begin expanding into the financial sector.
• ⚠️ Hype and caution: While FinTech offers exciting potential, there are significant risks of overhype, as seen with speculative cryptocurrencies and companies exploiting blockchain buzz.
• 🎭 Celebrity-backed scams: Several cryptocurrency projects heavily promoted by celebrities turned out to be fraudulent, prompting regulatory action and caution for investors.
• 🚀 Market over-excitement: Companies adding 'blockchain' to their name without real changes saw massive spikes in share prices, illustrating the market's emotional reaction to buzzwords.
• 📉 Learning from history: Bitcoin's price crash in 2018 mirrors previous speculative bubbles, such as the 17th-century tulip mania, underscoring the risks of unchecked excitement.

Q & A

What is FinTech and how is it different from traditional finance technologies?

FinTech, or financial technology, refers to new technology aimed at improving and automating the delivery and use of financial services. Unlike traditional financial technologies, such as ATMs or debit cards, modern FinTech has evolved rapidly due to innovations like blockchain, mobile banking, and robo-advisors.

How has mobile phone adoption changed from 1990 to today, and why is this relevant to FinTech?

In 1990, less than 1% of the world’s population had mobile phones. Today, almost everyone has one, illustrating the rapid adoption of technology. This is relevant to FinTech because financial innovations, like mobile banking, have similarly experienced rapid adoption, indicating how quickly FinTech can integrate into everyday life.

What is blockchain and why is it considered secure?

Blockchain is a distributed ledger system where copies of the same ledger are synced across multiple computers globally. This decentralized system, built on cryptography, makes it highly secure, as it is difficult to tamper with any single record without altering all copies simultaneously.

What are some examples of FinTech innovations outside of blockchain and cryptocurrencies?

Beyond blockchain and cryptocurrencies, examples of FinTech innovations include mobile banking, personalized insurance platforms, robo-advisors for financial management, and payment systems like digital wallets and peer-to-peer transfer services.

Why is the rise of FinTech considered a 'disruption'?

FinTech is considered a disruption because it is rapidly changing how traditional financial services operate, challenging established financial institutions by offering faster, cheaper, and more accessible solutions. Startups in FinTech are capturing significant market share in payments, lending, and personal finance.

What are 'unicorns' in the FinTech space and how many currently exist?

Unicorns in the FinTech space refer to private companies that are valued at over $1 billion. There are currently more than 40 FinTech unicorns globally, highlighting the financial and market significance of these rapidly growing companies.

How has the list of the largest companies by market valuation changed over the last 20 years?

In 1999, the top companies were a mix of tech and energy firms. By 2009, energy and finance companies dominated. However, in 2019, tech companies like Microsoft, Apple, Amazon, and Alphabet reemerged as the largest companies, illustrating the dominance of technology in the global economy.

Why are big tech companies now entering the financial services sector?

Big tech companies are entering the financial services sector due to regulatory pressures on their primary businesses and the opportunities in finance. Since financial services are also being regulated, these companies see it as an additional revenue stream and a way to diversify their businesses.

What risks are associated with the hype surrounding FinTech, and how can they be measured?

The hype around FinTech can lead to speculative investments and overvaluation, similar to previous bubbles like the dot-com bubble. Examples include inflated stock prices following superficial name changes, like 'blockchain' added to a company's name. This hype can overshadow legitimate innovations and create market instability.

What lessons can be learned from historical speculative bubbles, like the Bitcoin crash or the tulip mania in the 17th century?

Both the Bitcoin crash and tulip mania show that initial excitement around new innovations can lead to speculative bubbles, driven by psychological factors like euphoria and greed. Eventually, panic sets in, and the market crashes. These bubbles highlight the importance of balancing optimism with caution when investing in new technologies.