7 Factors Driving the Growth of Fintech

FinTechs are developing from new businesses to huge companies. Their focus will change throughout this journey, and one should consider critical elements. Financial technology, or Fintech, is driving innovation in financial services worldwide and changing the idea of business and end-client expectations for financial assistance. While the term fintech may convey various implications, it is currently considered to cover the utilization of multiple things. These include artificial intelligence, blockchain, cloud computing, and big data in regions like payments, clearing, settlement, deposits, lending, capital raising, insurance, investment management, and market support.

Hong Kong is an international FinTech hub characterized by a diverse, resilient, and dynamic landscape. Hong Kong, home to over 600 FinTech companies and over 3,700 start-ups, is one of the top cities globally for start-ups to scale up rapidly. Hong Kong FinTech Week celebrates the global hub’s scale-up opportunities for the FinTech industry in Hong Kong and across the Guangdong-Hong Kong-Macao Greater Bay Area.

Since Fintech emerged in the 21st century, various factors have added to fintech development; the advancements in technology are topping the list. We have distinguished the top seven factors that have added to the rise of Fintech across the world.

Technological Advancements

The ascent of cell phone utilization is among the principal elements of helping technological advancements and empowering it for mass adoption. Additionally, different factors that are playing an essential part in the change are referenced underneath:

• Instant payments.
• Identity confirmation technologies like biometrics, face acknowledgment, and iris examination.
• Online KYC and digital signatures.
• Internet of things.

Technology is changing the manner in which the finance industry works and conveys administration. The overall market is going through a significant change utilizing new and cutting-edge innovations. This technological advancement has significantly defined the development of Fintech across the globe, especially in Hong Kong. Hong Kong strikes a correct balance between innovations and ensuring that customer interests are adequately safeguarded.

Massive Capital Funding

Fintech market movement has picked up speed around the globe in the ongoing year. The global investment in the fintech business has surpassed last year’s interest. In Europe, the global investment has reached $26 billion with the UK driving the accused of more than $16 billion in overall fintech speculation. With that much cash filling the market, Fintech is in a situation to place extraordinary assets into development. Hong Kong has crossed all levels, and 86% of incumbent banks are progressively integrating FinTech as per the records.

As mentioned above, Hong Kong is also home to 600 fintech companies and has one of the highest consumer FinTech adoption rates of 67% in the world, ranking above markets including France, the USA, and Japan. The development of the fintech industry has drawn in multiple investors, including banks, insurance and wealth management firms, and non-banking corporates. The organizations, especially in Hong Kong, have begun perceiving the need to embrace Fintech and are making tremendous interest in new businesses.

Digitalization of Financial Services

Traditionally, clients needed to reach their closest bank for all their financial necessities like deposits, withdrawals, transfers, loans, and investments. With digitalization, the entire situation has seen a redesign. Digitalization has changed how banks and monetary associations communicate with clients and direct their tasks. Clients can now effectively deal with their bank accounts and investments through their cell phones without expecting to visit banks. The banking universe has been streamlined and compelling, putting control in customers’ hands.

Steady Regulations

Government regulations have played a critical impact on fintech development and give a steady administrative climate. For example, the European Union’s PSD2 (Second Payment Service Directive) regulation permits clients to share their financial data with the assistance of cured third-party APIs for better financial services. PSD2 permits banks and fintech firms to team up and create innovative items/services to cultivate fintech development. Hong Kong provides a supportive tax regime and ecosystem focusing on the development of the Fintech industry. According to Hong Kong Fintech regulations, the company that carries out “regulated activities” in Hong Kong must have a license from the SFC. This can be avoided only if they fall within the exemption. The new regulated activities proposed related to the OTC derivatives are relevant to fintech businesses operating in Hong Kong. The SFO regime applies to all types of entities that carry a regulated activity. There are certain regulatory regimes that are followed in Hong Kong, such as the Banking ordinance, MLO, AMLO, etc. One must know all these regimes when it comes to HK fintech regulations.

The Rise of Alternative Finance

The elective money market is making it clear that things are not pulling back, with an exceptional development level of 43% in the UK. Alternative finance, for example, peer-to-peer lending, crowdfunding, and invoice trading, have become famous in many areas of the world. The rise is seen not only in the west, but the east is also catching up fast in countries such as Hong Kong and china. Hong Kong permits individuals to loan or invest through web-based platforms wiping out the need for a mediator. Besides, alternative finance comes as a help to a more significant part of entrepreneurs who don’t meet the standards and guidelines for bank credits. They can avoid the strict principles and policies and acquire credits at reasonable loan costs.

Artificial Intelligence (AI) and Machine Learning (ML) in the product life cycle

The use of AI and ML is set to move beyond supporting combat fraud and enhancing operations to delivering granular insights across all areas of the payments value chain. They are incorporating more and more artificial intelligence(AI), improving their quality of products and services, and are proliferating.

Their Sharp Focus

There are three main advantages that fintech players have over incumbent players: Focus, focus, and focus. Well, the first one is to focus only on one service or product. In various cases, they are more petite and nimbler, and they have lower operating costs. The second focus should be on the customer. They concentrate more on customer experience by providing their product or service. Third, they focus on new technology that gives them an edge. One example is using artificial intelligence technology in traditional processes.

Conclusion

The Fintech industry is in the early adoption stage, but it is well-positioned to witness long-term growth. One needs to remember that FinTech isn’t just about technology but similarly about client experience and data. The most significant impact of innovations frequently comes not from the actual technology but rather from how they empower to rearrange creation and utilization in a totally new way. On a worldwide premise, a market of more than two billion people and countless organizations is ruled by Fintech, a significant part of which is in Hong Kong.

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