FINTECH REVOLUTION for Digital Banking Transformation

02 Dec 2020 5 Minutes reading
World life is changing time by time. These changes affect all aspects of human activity. It's not only humans who have evolved, the financial industry and the banking sector also grew. And now we're in the disruption era. We are getting used to something that is very simple, easy, and practical. The industrial revolution 4.0 disrupted almost all aspects of human life. Technology has shifted the human lifestyle from manuals to digital services. Financial transactions now are getting more simple, fast, and real-time. The industrial revolution creates a new business model using digital technology — for example, financial technology (fintech) startups. Generally, fintech is a technological innovation that occurs in the financial sector. How fintech revolution go faster? It’s all started with the first principles of design thinking. Exploration is necessary so that we do not repeat the same thing that has been done by others before What is FIN-TECH? There is no clear definition of fin-tech because of its rapid transformation. Naturally, it is something new in the financial sector. Fintech is the result of 3 financial, technology, and regulation. Technology use is the main point of all activities in the digital revolution. So that, access to finance has dependencies with technology devices, networks, and applications. Let see to every smartphone of us. They are many amazing specifications we can choose, whether functionality, features, product design, and its price. Through this sophisticated smartphone, we are free to make payment transactions, purchase goods, send money, and so on. The high need for internet access via devices provides opportunities on the network side. Internet providers offer many choices of ways to access, bandwidth, speed, and other added values. To sum up, technology has potent effects in digital financial services. It changed the way of delivering information and data, reducing friction (obstacles), and immediate response. Fintech makes it possible to do that. He develops financial services further than essential services. Payment, storage, financing, asset management, and other business services can grow faster with a touch of technological innovation. The use of technology in financial services is going so fast. Compared to fintech, banks have a myriad of rules and regulations made by regulators, including operational aspects, risk management, and data security. Old rules in the field of conventional finance are not compatible with digital financial services. So, this is a challenge for regulators to ensure all business transactions work orderly, safe, and following established pillars. FINTECH: How It Affects to Financial Services and Give Positif Impact? As a new digital player, fintech has an excellent opportunity to shift the role of formal financial institutions such as banks. How could it be? Fintech startups adopt digital technology approaches to drive their business process. They use future technology compatible with industrial revolution 4.0. Technology they use is big data analytics, artificial intelligence, cyber security, bio metrics, block chain, cloud infrastructure. To deal with digital disruption in the 4.0 era, banks need to improve their customer experience by utilizing technology. Like in terms of network, cloud, and security. Even so, fintech is a significant threat that will shift the banking sector. Both fintech and banking can collaborate to expand financial services, so they can reach unbaked and under banked people. Fintech startups presence has a positive impact on the side of consumers, business people, and the country. First, consumers have more alternative choices with better services, more accessible systems, and more affordable prices. On the side of a business owners, they simplify business processes and transaction chains, reduce capital and operational costs, and manage the flow of information and data. On a larger scale, fintech encourages the delivery of economic policies and improves the economy because of the fast turnaround of money. In Indonesia context, fintech supports Indonesia government's program 'Strategi Nasional Keuangan Inklusif' (SKNI). They can also act as formal financial institutions as a bank. One of them is in the case of a payment system, including: • Create a market for businesses by providing payment tools, settlement, and clearing • Help those who need to save, borrow funds and more efficient investments • Mitigating the risk of conventional payment systems FIN-TECH Journey, a Long Story of Fintech Revolution Financial activities basically already been done for a few hundred years ago. The shape of the initial technology when physical, coins, followed by banknotes. It functions as a storage system for government financial records, tax payments, agricultural production, or building facility records. Fintech 1.0 Historical of financial technology started has existed in 1867. This is indicated by the launch of the first trans-Atlantic telegraph cable. Its function is for instant communication between the main markets of New York and London, London and Paris, and finally, Shanghai and London. The invention of the transatlantic telegraph cable or known as the Victorian internet, became the basis of various things in the present. It is not only used in financial technology, but also in other communications. Phase 1.0 is also characterized by the emergence of the process of decoding and encoding (encryption). The trigger was the occurrence of the second world war, which spent a lot of effort. So it needs the development of secure communications, especially for military and intelligence operations. From then-emerging computer technology that uses artificial intelligence, or AI. Fintech 2.0 This phase lasts for about 40 years, starting in 1967. The exact financial technology in this phase began doing digitization processes and systems that were previously done analog. For example, handwriting activities and physical calculations are altered in the form of a digital system. First, the invention of the ATM, the first automatic teller machine by the Barclays Bank in the UK. The next innovation is the launch of the first handheld calculators by Texas Instruments. Handheld calculator’s transformation technology so early foundations in the present. In addition to the digitization process, phase 2.0 also emerged as a big trend that occurred in the global financial market. At the end of 1960 was born the establishment of a series of electronic payment systems domestically and internationally. This system allows payments with great value throughout the world, and the process is real-time. SWIFT, the provider organization protocols that enable digital communication between domestic payment systems between countries and across borders. The second trend, the presence of NASDAQ in 1971. He is the first electronic stock exchange in the world. And the last, online banking operation in 1980. In 1999 the internet became the peak of the boom. Emerging tech companies such as Yahoo, Google, Amazon, PayPal, and dot com, are so hype. Investors began to shift in the technology sector, and make internet companies as an economic bubble. Fintech 3.0 | 3.5 Digitizing the development of the financial system reached a turning point in 2008. The global financial crisis started from the subprime real estate market in the United States, in fact, have an impact on the global financial system over the world. The global crisis has a negative impact, but on the other hand, it also raises new opportunities. Some of the impacts caused by the global financial crisis include: • Young people lost their jobs in the financial sector. Then tt forced them to look for new opportunities by creating a fin-tech startup. • Economic slowdown in developing countries • New regulatory changes resulting in profits of financial institutions fell, while the cost of regulatory compliance and increased sharply. • Loss or decline in trust in traditional financial institutions. The expansion of fin-tech is increasingly complex with the presence of smartphones in a sluggish market. The launch of the first iPhone in 2007, as well as other smartphones fintech, transform into more sophisticated models such as this. In developing and emerging markets, fintech transformation might be more dramatic. In the same year, Kenya launched the M-Pesa digital financial service, a mobile-based payment system. Even the same in China use the payment system using a cell phone. Fintech 4.0 The main thing that is visible from fintech 4.0 is that it is embedding technology of the future into the process and system services. That technology provides contextual and real experiences for consumers in conducting financial transactions. Artificial intelligence (AI) technology, for example, not only does the machine automate the system, but it is also capable of analyzing and projecting business opportunities. Likewise, big data technology is used for greater impact. Fintech transformation in the 4.0 era increasingly complex. We can see various fintech startups with different business models. At least some fintech classifications include: Crowdfunding e.g.,, limakilo, arisan mapan, Peer-to-Peer Lending e.g. koinworks, kredivo, uang teman Payment, Clearing, dan Settlement e.g. paytrren, midtrans, gopay, kudo, cashlez Post system e.g. moka, pawoon, olsera, omegasoft Market Aggregator e.g.,

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