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Fintech: Transformation, or Global Revolution?

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How will fintech change your life? The answer depends on where you live.

In the West, financial technology is about having better options - from how to pay for things (for example, with contactless payments), or borrow or transfer money (via companies like Funding Circle and Transferwise). In the UK, there are now even new 'challenger' banks that offer alternatives to long-established players like Lloyds Bank and Natwest.

This is a concern for the incumbents. Fintech newcomers are starting to chip away at their profit centres, leaving them with less attractive businesses supported by expensive-to-maintain infrastructure.

Now, the big banks fear what former Barclays CEO Anthony Jenkins calls the 'Uber moment' - when they will be thrown upside down by tech progress in the same way as the taxi industry, leading to slashed profits, branch closures and severe job cuts.

These worries are over-dramatic, but not necessarily misplaced. Increased competition from fintech companies will force incumbents to raise their game or lose out. But the major players should be large enough and smart enough to adapt.

It's also easy to overstate the extent of the step change in the West. Yes, I can now move my money around more simply and quickly, borrow from different people than before, or check my balance with my phone - not my laptop.

But this only improves my life a modest extent, and other changes - like switching my account to a challenger bank - seem like a hassle, and won't be widely adopted by apathetic consumers. The real impact of fintech in developed countries will be felt in the back office, where new efficiencies and technologies such as blockchain, and improvements to know-your-customer processes, have the potential to transform some banking operations for the better.

This won't be the case elsewhere though.

In the West, we take having a bank account for granted. However, in many countries, most people are unbanked - the World Bank has estimated that about three-quarters of the world's poor don't have any kind of bank account. And this isn't just because of a fundamental lack of wealth - it's also due to factors like banking charges, travel distance and paperwork.

Fintech changes all that. Mobile 3G phones are now available, affordable and effective enough, even in the world's poorer countries. For example, Indonesia now has around 100 million mobile phone users, most of whom are young and quickly adopt new technologies. And if you can acquire a phone, you can access a bank account - potentially transforming vast swathes of the world's population from completely unbanked, to being able to access similar services to those we enjoy in the West.

This means that in the developing world, we will see nothing less than a financial revolution. We are about to witness the start of the creation of a new banking system, one that billions of people will be able to access - providing additional financial security and independence, and opening the door to microfinancing and crowdfunding, and even to new banking groups that can expand incredibly quickly and challenge the status quo.

In fintech, we talk a lot about changing the world, but we are often guilty of limiting our expectations to the West. I believe that the impact of fintech will be felt far more widely than that, and perhaps none of us yet understand what the industry may yet achieve - and what the consequences will be.

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