The financial technology (fintech) revolution is being led by the banking sector and it is growing at its fastest pace in Asia, according to Andrew Work, Head Content Strategist for Asia Pacific of NexChange, a professional social network for the financial services industry based in Hong Kong.
“Because banks are under regulatory pressure as they have never been before, they have to find new technologies,” he stated during a talk organised by the France Macau Business Association (FMBA) yesterday.
So they are pushing the revolution forward.
The finance specialist also said that “big techs” in China are not only “piling into finance” – a trend that has not been observed in the West, at least initially – but that it is also one of the sectors which is “the most opened to foreign business” in the country.
Work further pointed out that the technological trend, which first started in high finance, has started spreading to other fields. These would include customer-based experience services such as insurance companies, which are now “trying to sell insurance without using agents,” or micro-insurance, developing cheaper, short-term contracts, delivered via mobile phone applications.
It is revolution
During his talk, Work explained that there are two marked technological trends driving the fintech revolution today: quantum computing, and cryptocurrency and blockchain technology.
Essentially, quantum computing consists of figuring out ways of applying quantum physics knowledge to computing.
The premise is to find more efficient ways to organise the “morass of data” generated and compiled through cloud technology, the Internet of Things (IoT), and financial transaction records – usually called Big Data – enabling Artificial Intelligence (AI) to process the information.
“As the [volume of] data dramatically ramps up, the power of Artificial Intelligence needs to be dramatically ramped up. And that’s when quantum computing comes in,” said the expert.
Work told Business Daily he would be “surprised” if a company such as Alibaba was not investing in cutting-edge technology development in fintech, such as quantum computing.
“These are independent stand-alone companies, coming out of universities, because this is very basic research, and that gets out of university and it is commercialised,” he noted.
As for cryptocurrencies, the specialist said they break up into two major categories.
The first one is bitcoin, “which is like any currency,” said Work, because they draw on the “fundamentals of money,” such as the capacity to generate belief in stored value and in the use of it to acquire things.
The other one is called utility tokens or smart contracts, commonly run through blockchain technology, which enables the creation of tokens than can, in turn, create the “reality of exchange.”
Utility tokens, Work explained, are “a bit like airline points,” claiming they are “worth something” because they can be used “somewhere specific,” which is what “gives them value in the broader market.”
“Utility means that you can connect it [the token] to a software platform, and the idea that this platform will be adopted by a lot of people, that they would need the tokens to access it and get the benefit of it, whatever it is, and therefore, the currency itself, will be valuable,” he continued.
Monetary transactions, as with commonly accepted, officially recognised currencies, happen at a stage called initial coin offers (ICO), in which the people or companies which create those tokens pre-sell them to investors, who then open them out for public sale.
“In the old days, you would just put it out to the public. Now, it is a two-stage process,” Work told Business Daily.