The United States has been the world’s leading innovator in financial technology (or FinTech) for over sixty years. China, on the other hand, has risen to the top of the global financial inclusion race in the last decade, thanks to smartphones and social media applications that have enabled remote payments and the digitization of money management. However, it is unlikely to be the leader for long. African countries such as Nigeria and Kenya have recently emerged as FinTech hotbeds, using low-cost, easily available technology to mobilize customers in previously unseen ways. To remain competitive, American banks and FinTech firms must research the reasons that allow these achievements abroad and find out how to keep up.
Popularity of Fintech
Simply put, FinTech is the use of technologies and creativity to meet the financial needs of both customers and businesses, considering payment cards, internet banking, and blockchain-based cryptocurrency. FinTech was one of the most explosive sectors of the last decade, despite being arguably just the newest addition of the millennia-old evolution of credit, contracts, and banking.
The massive acceleration of its development was aided by venture investors, conventional financial companies, states, and even ordinary smartphone users. Remote orders, app-based stock trades, and electronic insurance claims have all become standard. During the first half of the decade, over $50 billion was spent in the industry, with triple-digit year-over-year growth being the norm.
New FinTech, on the other hand, has a much longer history than a few decades. Three large waves of the invention have occurred, each focused on a major area at a specific time. While the United States led the first big wave of disruption in this sector, it has since fallen behind as businesses and customers have reached the point that good enough is no longer enough. However, by researching where FinTech has been and is heading, American businesses will also keep up.
Fintech In Kenya
Kenya is the shining example. Mobile adoption rates in the world have skyrocketed, with subscribers exceeding the overall population by 12%, and FinTech technologies have followed. Safaricom, the country’s largest telecommunications company, contributes 5% of the country’s GDP. M-Pesa blends Safaricom’s network system with an agent model; customers’ balances are stored by Safaricom, and they can conduct purchases in person at one of the country’s 110,000 agents. The whole scheme is based on text message technologies and has spread to seven countries. Not everyone would imagine that the crypto market and demand for the Forex brokers in Kenya would increase this much. Equitel, a prepaid virtual network provider that competes with Safaricom’s M-Pesa, is driving financial inclusion even further by providing a comprehensive range of banking services on mobile devices. Equitel is a modern form of hybrid business, a telecommunications business born of a bank, that was conceived equally by imagination and necessity.
Equity Bank, the parent firm, teamed up with Airtel, a multinational telco, to provide customers a network from two long-standing firms. To demonstrate use, it dispatched agents around the world, including to places where no other banks or telcos had ventured. Equitel used a locally based approach to gain 22 percent of the mobile money market in just five years.
These businesses have significantly increased the country’s financial inclusion. In 2006, only 26% of Kenyans had access to financial services; currently, 83 percent of the population has access to at least basic financial services. Ses technologies have not only been exported but also models for other African countries. Following Kenya’s example, twenty-four countries have committed to a Digital Economy Blueprint.
Fintech Century
The first generation of modern FinTech created innovations that have changed the way we use money today, with the majority of the invention taking place in the United States. The introduction of modern credit in the United States in the early 1950s, with the Diners Club Card, was a watershed moment: it represented a much more convenient form of payment and often doubled as a streamlined way to extend new credit to customers.
The Bankograph, an electronic envelope deposit system, and the first prototypical ATM were built for the City Bank of New York in the 1960s. With the growth of the internet and the birth of online banking, the United States maintained its leadership in the FinTech space, followed by the banking sector and other conventional financial institutions.
The second wave of new FinTech, which began in the 2000s and is now cresting, originated from Asia, specifically China, and generated a slew of widely accepted technologies. With a large population for whom physical banking was formerly unavailable, the country’s advancements were made via mobile applications.
However, the focus of FinTech disruption seems to be changing once more, this time to Africa. This wave is characterized by its inclusive mobile banking systems, which are united by the abundance of mobile phones, even in the absence of internet-capable phones. According to the United Nations, Africa is home to 33 of the world’s 47 least developed countries. Infrastructure for widespread mobile and Internet use, which took decades to develop in the United States and China, is still in its infancy. What would be a bane in other regions is a blessing for FinTech, which will make it leapfrog well ahead.
