Fintechs and the financial market future

There are no news that Fintech companies are a real threat to the future of large financial corporations. But how Fintech (Financial Technology) have driven the future of the financial sector and how traditional and established corporations have responded to these threats?

Fintechs are already running the market for a long time. Then, what is special now? To answer this question we need to think a bit in the type of products and services being offered by these companies, which target audience and why it is taking off the sleep of financial institutions.

More than simply develop new systems or upgrade legacy systems for financial institutions, Fintechs began to develop and bring to market their own integrated applications and solutions to compete directly with them. They are mobile payment applications, resource transfer, credit card services and, in some cases, even the opening and maintenance of fully digital checking or saving accounts, which includes services such as P2P loans, mortgages, financing, insurance, etc.). In this model, the client no longer needs any physical interaction with the institutions. And by offering their services and a complete customer service environment through the digital world without physical branches, Fintechs can provide their products and services at a fraction of the cost of traditional banking products, such as Nubank with their no annual fee credit card. In addition, banks have not shown the same ability to quickly adapt to changes in the digital consumer behaviour, something Fintechs can easily do – quickly and very well.

Something that is also forcing banks to rethink their business models are the increasing regulatory demands. In the face of tighter budgets and anxious to meet all major standards and market regulations, these institutions are rather looking for ways to improve efficiency and reduce costs. Nevertheless, its heavy processes - and even tied - decision-making process and the consequent implementation of new ideas are turned into an arduous and slow task, bringing another challenge for banks. Thus, the agility of Fintechs with its lean mind set and culture of innovation focus can be highlighted, and a strong factor that has counted in favour of its rapid growth.

All that without mentioning the called cryptocurrency, or digital money, which has led to large institutions like Goldman Sachs and JP Morgan initiate global projects to increase the efficiency of trading and settlement of assets.

Inside of Brazilian market, the number of users who owns smartphones surpassed the milestone of 76 million in the third quarter of 2015. Most people prefer the speed and convenience of applications available for these devices. Included in this growing number, we have the so-called Generation Z. People who were born and grew up with the World Wide Web (1990) and the explosion and popularization of technological devices by the end of 2010. This demanding and highly digital mass of consumers no longer find themselves satisfied with the traditional model offered by financial institutions, and therefore are more willing to try new products and banking services, from companies that does not yet have a solid brand recognition, as traditional banks have. This generation of digital natives will make the difference and define which companies will still exist in a future that has already begun.

In 2015, some UK Fintechs earned banking licenses under the agreement of the government and market regulators and were allowed to expand its portfolio of mobile products and services, increasing competitiveness in the sector. Given the speed of technological change and financial services, any financial institution, even if well established in the market and in front of their customers, cannot afford to ignore the threats or opportunities that Fintechs represent.

According to a recent report made by PwC, (Blurred Lines: How FinTech is Shaping Financial Services), by 2020, over 20% of the financial services business may be at risk because of emerging FinTechs, so now more than ever, financial institutions need to change their mind set to meet the needs of the digital consumer, integrating the digitization of its processes to its corporate DNA. And according to this same study, the ways to achieve this are: put a FinTech methodology as the centre of its strategy, adopt a mobile-first approach, collaborating with FINTECH companies and understand the background regulatory challenges.

Modern consumers are increasingly comparing the digital banking experience from your bank with companies like Apple, Amazon and Google - who were not famous for their banking services but as well as Fintechs have also taken the sleep of many traditional organizations of financial services. Financial institutions that do not define and start a real digital strategy for the upcoming years will face serious problems to remain profitable in this market.

This article was originally published in Brazilian Portuguese language at Computerworld.com.

Mobile payments, IoT and wearables all the talk at Mobile World Congress

Source: Mobile payments, IoT and wearables all the talk at Mobile World Congress


Mobile World Congress may be over, but the dust is still settling from the biggest mobile event of the year.

With so many announcements before, during and after the event, it can be hard to separate the gold dust from the gimmicks. To help, here's our summary of some of the biggest mobile payments trends from the event, and what they mean for the industry in 2016 and beyond.

The Decline of Tablets and Smartwatches?
Trends can often be identified by what is missing and major tablet launches – once such a fixture of MWC – were conspicuous by their absence. Ever expanding smartphone screens have led to decreasing consumer demand for tablets, meaning decreasing profit margins for manufacturers. The result? Some industry commentators are claiming that the tablet market is no more but we'll have to wait for the full picture.

Similarly, there were no significant smartwatch announcements. Early adopters, however, needn't fear. The smartwatch is not dead, just resting. Barcelona marked the calm before the storm with developers and manufacturers refining and perfecting their offering. Rest assured, we can expect some big announcements in the second half of this year.

Virtual Reality & Tokenization
No tablets? No smartwatches? The hype that has traditionally surrounded these technologies may lead you to wonder how the organizers filled some 110,000 meters of exhibition space. It was a good job, then, that the launch of Samsung's Gear VR, HTC's Vive and the countless demos on the show floor has seen 2016 heralded as the year that virtual reality (VR) moved from a sci-fi pipe dream to our sofas.

VR was everywhere. Even at the Bell ID booth, where our VR demonstration was back by popular demand. The demo immersed delegates in the tokenization process, enabling them to see every step in the mobile contactless payments chain, where each player sits and how they interact with each other to deliver seamless, secured mobile payments for customers.

Tokenization itself also continued to make the headlines. For example, Giesecke and Devrient announced that it has integrated its cloud-based payments platform with the MasterCard Digital Enablement Service (MDES). This is undoubtedly good progress for tokenization, as it underpins its position as the technology for securing mobile payments.

However, by becoming a Token Service Provider, as Canadian debit network Interac recently did, issuing banks have the freedom to integrate with any payment scheme and therefore any mobile device or wearable. This ensures they can adapt to the complex and fluid dynamics of the mobile payments market, rather than be tied to a single payment scheme or original equipment manufacturer (OEM).

Mobile Payments
As expected, the mobile payments announcements came thick and fast. MasterCard confirmed that its biometric authentication system for mobile payments (popularly known as ‘Selfie Pay’ but also including fingerprint recognition) will soon be rolled out across the U.S., Canada and parts of Europe. The launch is in response to a successful trial in the Netherlands, where nine out of ten participants confirmed they would 'definitely' like to replace passwords with biometric authentication. As security concerns are often cited by consumers as a barrier for adoption, this is an important development for the industry.

PayPal also came to Barcelona armed with a big announcement. Its customers in the U.S. and Australia will now be able to make NFC payments through the PayPal Android mobile app, and consumers across Europe will be able to tap and pay using their phone through the Vodafone mobile wallet, thanks to a partnership between the two companies. This is a big moment for PayPal as it marks an expansion into the increasingly lucrative in-store contactless payments market, and also a vindication for NFC technology, which PayPal had previously rejected as being unsuitable for in-store payments.

But what of the various 'OEM Pay' platforms? Prior to the show, Samsung announced that Samsung Pay had hit over 5 million users in just five months. This figure is only going to head north with the platform set to launch in China in March and the U.K. later in 2016. Watch this space for various new market announcements from all the OEM Pay platforms throughout 2016.

Barcelona also heralded good news for banks looking for alternative ways to integrate with Android Pay. Bell ID announced that its customers worldwide can utilize its token service provider (TSP) software to enable and secure NFC payments functionality on Android phones. In addition, Oberthur Technologies confirmed that it will support Android Pay in Australia.

Internet of Things (IoT)
We were treated to a glimpse of how IoT technology and payments will intersect in the coming years, with the announcement that Visa is expanding its Visa Ready program to include manufacturers of wearables, automobiles, household appliances and clothing, to name just a few. This news also confirmed that tokenization technology will be key to securing these emerging payment technologies. Expect to hear much more on this at future events.

As one would expect and hope, there was also a lot of focus on security at MWC, particularly in the IoT sector. Rambus announced that it has expanded its technology to support in-field provisioning. This means that credentials can be secured and managed not only on the silicon chip in the factory, but also in the cloud when in the hands of the consumer. As we enter the IoT era, this flexibility will be key to supporting the growing requirements of trusted applications, including secure mobile banking, identity and entertainment.

Changing Face of Mobile
On a broader note, for many years Mobile World Congress focused on smartphones. 'Mobile', however, is becoming an increasingly broad concept, and this year's show was perhaps the biggest indicator of this trend. This increased diversity will play a central role in how we pay using our mobile devices, whatever they may be, now and in the years to come.