FinTech – The Rehashing of Old Payment Methods And Focus on Blockchain Technology

FinTech – The Rehashing of Old Payment Methods And Focus on Blockchain Technology

FinTech is a term that will pop up across the world more and more. There is no denying that the world of finance is desperately in need for a new breed of technological advancement, after being “stuck” in the same principles and systems for over half a decade. Mobile payments are often touted as an important aspect of FinTech, but how innovative are these payment methods really? Not as innovative as Bitcoin and blockchain technology, that’s for sure.

Also read: Apple Pay: Same Old Ball & Chain

 Innovation in the Financial Sector At a Standstill

Whenever someone talks about how the current financial ecosystem is working fine the way it is, the reason for the lack of innovation becomes crystal clear. Whenever something is not utterly broken, there is no reason to fix it, right? Well, that is where most people are wrong, especially when it comes to the way finances are and should be handled.

Our society has been reaping the benefits of an established banking structure in most parts of the world while leaving some regions underbanked and even unbanked. In the Western world, it is only normal to open a bank account at a certain age, and use a bank card tied to that account. At a later age, having a credit card is less of luxury and more of a mainstream commodity in that part of the world.

All of this is in stark contrast to the unbanked and underbanked parts of the globe, where people simply don’t have access to a financial system as the Western world knows it. Granted, everyone can open a bank account, yet some governments ask for certain documents for a citizen to qualify for even having the right to get an account. Not everyone can or wants to provide that form if documentation, as it only gives the local government even more insight into their financial habits.

During the recent Greece crisis/debacle/charade, “capital control” was a very popular term. To put this in layman terms: money from outside of Greece was not being accepted, and Greek citizens could not transfer their funds out of the country either. Despite having a unified currency – the EURO, which is used in most EU countries – financial institutions prohibited moving funds outside of the country. Quite an astonishing feat in this day and age, don’t you think?

This begs the question why a currency such as the EURO was invented in the first placed. Creating a unified Europe was one thing, but giving most countries exactly the same coin was something entirely different. On the one hand, the EURO solved the problem of currency exchange requirements while traveling from one European country to the next, a welcome change in that regard might I add.

But on the other hand, it creates a closed down financial ecosystem in which all countries where the EURO is used are tied to the European Central Bank. Every individual country still has their own local bank branches, but they all answer to the European Central Bank as well. And as was seen during the Greek Tragedy of 2015, that European Central Bank held all the cards to bail out Greece or drop them from the EU. Such financial power in the hands of a handful of people is wrong, an abomination of power that invites corruption on all levels. But that is a discussion for another time.

So what makes Greece able to exert capital controls in their own country, despite having to answer to the European Central Bank? The answer to that is simple: Greece still had a stash of cash within their own ecosystem of banks and locked down all of that funds for a time. Even though those funds belonged to the customers of those banks, the Greek government exerted its absolute power of the money of individuals. Clearly, the current financial system is broken.

FinTech Innovation: Rehashing The Old Ecosystem Without Changes

Alas, the time has finally come for developers, financial institutions and engineers to look at the future and build new platforms, most of which are focused on mobile payments. With so many people carrying a smartphone with them every day, it only makes sense to turn that device into a form of payment sooner or later. And it has to be said, the everyday consumer is taking a liking to the idea of using their mobile device for payments.

In a recent study, it showed that consumers are not a fan of digital wallets at all. They feel insecure by storing all of that financial data on their mobile device, and giving out sensitive information to app providers. Oddly enough, those same customers have no problem linking their credit card or bank account to mobile payment options such as Paypal or Apple Pay.

There is nothing that makes a digital wallet more or less secure than the Apple Pay or Paypal applications, mind you. All of these services control the consumer’s details, including financial data and process it on behalf of the customer. And the worst part is, all of these services are centralized, just like the European Central Bank is a centralized institution.

FinTech is currently evolving in such a way that the new “wave of innovation” will focus on bringing many more mobile payment applications will be revealed to the public. To counter that statement, just because a new mobile payment application is launched, that doesn’t make it FinTech or innovation, as it is rehashing the same old payment methods.

Take any type of mobile payment application in the App Store of your mobile operating system, and 99% of them will ask the consumer to link their bank account, credit card or debit card to this “new” service. In the end, there is very little innovation going on in this regard, as consumers are still forced to rely on the existing financial infrastructure that has been around for 50 years, and has seen little to no innovation to speak of.

The New Breed of Technology Is Already Here

However, it has to be said that a small number of mobile payment options are looking at a brand new technology, called the blockchain. The term blockchain is related to Bitcoin, a disruptive digital currency that acts as a borderless payment method. No central authorities are involved, nor are there any banks issuing Bitcoin, as all aspects of this new type of economy are controlled by the individual users.

And this is what a lot of financial institutions are exploring at this very moment. Creating a more transparent system which facilitates the transfer of value around the world at far cheaper rates is a true innovation in the world of finance. Blockchain technology is an area of technology that was despised by financial institutions in the early days, but as the technology evolved, the same institutions started to see the benefits of working with the blockchain.

It will take some time until the first blockchain-based applications and platforms make it to the world of finance as we know it. But rest assured, there is a new wave of innovation just around the corner, which will not rely on the outdated financial infrastructure we have all grown accustomed to. The blockchain will change the world of finance as we know it, and there has never been a more exciting time for FinTech than right now.

However, it has to be said that a small number of mobile payment options are looking at a brand new technology, called the blockchain. The term blockchain is related to Bitcoin, a disruptive digital currency that acts as a borderless payment method. No central authorities are involved, nor are there any banks issuing Bitcoin, as all aspects of this new type of economy are controlled by the individual users.

And this is what a lot of financial institutions are exploring at this very moment. Creating a more transparent system which facilitates the transfer of value around the world at far cheaper rates is a true innovation in the world of finance. Blockchain technology is an area of technology that was despised by financial institutions in the early days, but as the technology evolved, the same institutions started to see the benefits of working with the blockchain.

It will take some time until the first blockchain-based applications and platforms make it to the world of finance as we know it. But rest assured, there is a new wave of innovation just around the corner, which will not rely on the outdated financial infrastructure we have all grown accustomed to. The blockchain will change the world of finance as we know it, and there has never been a more exciting time for FinTech than right now.

Images courtesy of Shutterstock

 

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Jean-Pierre Buntinx is a freelance Bitcoin writer and Bitcoin journalist for various digital currency news outlets around the world, Jean-Pierre also has a keen interest in Fintech and technology, and he is always open to new challenges.