Why It Should Be 'Financial Web', Not 'Fintech'
The case for financial services as a foundational layer
The way the startup ecosystem in Asia Pacific classifies its industries needs drastic improvement. Most often we abbreviate the name of the industry, if it’s not already one word, and then pair it with the suffix “tech.” Hence we have everything from health-tech, reg-tech, insure-tech to gov-tech, med-tech, and fin-tech.
This taxonomy seems to imply that all of these industries are distinct from one another, but ultimately on the same level. This implication is erroneous. One of these industries is not like the others. Any guesses?
It’s fin-tech. Fin-tech is not a distinct category of technology, but a foundational layer that will define the current generation of the web.
If the previous generation of the internet was defined by the social web, this one will be defined by digitally-enabled financial services. This horizontal layer of businesses will shape everything we do online, whether it’s buying, selling, exchanging, trading, investing, or participating in some other financial transaction. Because financial technology will power our digital lives, the tech ecosystem in Asia Pacific should consider referring to them collectively as the financial web.
The financial web deserves recognition as a much broader, encompassing sphere of technology because it’s important for the ecosystem to realize how important it is for the future of Asia Pacific as a whole, and it will change finance in a way that all founders should take note of.
The financial web will democratize wealth management: Financial advisors were once considered a sacred privilege of the rich, but not anymore, thanks to robo-advisors.
Robo-advisors are sort of like what they sound: these solutions automate the giving of financial advice through algorithms and artificial intelligence. They're also very personalized, depending on your financial goals. Some people may want to save for their children’s college, others may want to buy their first home, while still others may want to create a safety net. Robo-advisors help consumers make better use of their increasingly larger disposable incomes.
The financial web will reduce the credit gap: There are many small business owners across Asia who want access to capital, but are denied loans from traditional financial institutions because they are unbanked. Mobile wallets and smartphone penetration can address this gap.
Rather than rely on traditional financial information like credit scores, there are alternative credit-score providers that determine credit-worthiness based on telco or social media data. Using alternative data means that millions more people across Asia who are credit-worthy can finally get access they need to grow their businesses further.
The financial web will improve social mobility: An increasing number of traditional brokerages across Asia are going digital, taking on the look and feel of a tech company. In the Philippines, for instance, Col Financial was one of the first brokers to open its online trading to smaller minimum accounts, breaking from the tradition of only working with higher net worth individuals.
This trend of brokerages going digital or even digital-first will increase access to significantly more people, as the strategy will enable them to scale much faster, just as their startup peers in the industry do. This pattern is also occurring in other legacy financial services industries, such as foreign exchange companies, who are providing digital tools and resources to better cater to the next generation of traders. This mainstreaming of financial services online will be a wealth creation engine for digital natives.
Why you should care about the financial web
The popularization of the term fintech means that many founders, whose businesses may be enhanced by financial technologies or services, often neglect them. They are not a fintech founder, after all.
But the truth is that digitally enabled financial services will bring sweeping and massive changes to the population in Asia Pacific, so everyone must prepare. You must think about how the financial web will affect your customers, how it can be used to improve your products and services, and how you can collaborate with partners in the industry to better leverage their technology.
The financial web is a helpful term in this regard: It should make you realize that you are part of a larger interconnected fabric, one where you can now work with others to bring prosperity to all.
Hkyle Javelosa is the former vice president for sales at TradeMax Capital PH, and has five years of experience in stock and forex trading. She actively promotes financial literacy to her fellow Filipinos through Juan Entrepreneur, a financial literacy group on Facebook.