I’ve blogged about how I see leadership in the developing (developed now) economies of China and India, and the newer innovation models of emerging economies in Sub-Saharan Africa, but not quite in the way in which I see them now. The more I think about it, we have three major fintech models, each with their own unique blend of thinking.
The mainstream fintech discussion here in Europe and America is how to reboot the antiquated banking system. Due to the implementation of technologies from the 1960s onwards, these economies have a heavily layered structure of year upon year of relentless upgrades and recovery plans. These are the economies that talk about the challenges of legacy systems and core system upgrades, and they recognize that something radical has to be done. Due to the antiquated nature of the infrastructure of these economies – most of which pre-dates the internet – I call them legacy economies. The fintech in these legacy economies approach things in three ways:
- Broaden the financial offer to those who have been underserved or unserved in these markets, for example Funding Circle for SMEs and SoFi for students;
- Remove the inefficiencies inside banks, such as the cost overheads of the client onboarding processes; and/or
- Remove the friction in the customer journey by making things far easier, as Stripe and Square aim to do.
However, all of the fintech radar ends up focussing on the incumbent’s existing way of doing things and, as a consequence, ways of inventing faster horses or horses with bells and whistles.
Then there is the bewildering speed at which China and India have moved towards demonetization, through innovation (Ant, Tencent and Baidu), but also through government mandate (Aadhaar, UPI).
Both economies are what Jim O’Neill threw into the BRICs discussion of 2003, although Brazil and Russia have not performed nearly as well economically or technologically as China and India. For these reasons, I see the fintech in China and India as demonstrating characteristics of growth economies. They started with nothing and built from the ground up. Unlike Europe and America, who are adding fintech to what was there before, China and India (and other nations like Poland and Turkey) began their journey with not much there.
Their journey began in the late 1990s, with an internet-enabled platform right from the beginning. That is why the Indian ICICI bank was one of the first to offer Facebook customer servicing, along with Turkish bank DenizBank. Meanwhile, as I blogged on TNW the other day, Ant Financial are taking over the mobile payments world. Their vision is based upon being an integrated Facebook, Amazon and PayPal all-in-one, just like the other Chinese internet giants Tencent and Baidu. These firms were unencumbered by history and legacy, and hence built from a clean vision up, rather than trying to retrofit their ideas into old markets – which is why Facebook, Amazon and PayPal are segregated.
The growth economies are thus notable for an unencumbered vision of leveraging the network, and their unencumbered vision will allow them to go globally without shackles, unlike their American counterparts.
And then we have the innovation economies. These are the economies that are rapidly uplifting from poverty to consumption, and include many of the Sub-Saharan African countries – Nigeria, Ghana, Uganda, Tanzania, Kenya, Mali – as well as Pakistan, Afghanistan and their brethren, the Philippines, Indonesia and much of South America.
I call these the innovation economies, as they pretty much had nothing until the mobile network appeared. I’ve blogged about that a lot lately, so don’t want to do it again, except to say that mobile financial inclusion is the most important development since banking first appeared. Secondly, that the images most people have of these countries in what they call the emerging markets are wrong. That was quite clear from my cut and paste of Bill Gates’ stakeholder letter for the Bill & Melinda Gates Foundation.
In summary, as that covers it for this post, you have the Legacy West, the Growth East and the Innovative Emerging. Something like that anyway and, going back to where I started, if you are looking for the next generation financial system, you definitely will not find it in the Legacy West. That will show you the next generation of the existing system. You need to look to the emerging markets specifically, as they are leap-frogging all of us. A great example is that the emerging economies will show us the next digital identity scheme, as this is critical to inclusion. Watch this space.
Chris Skinner will be speaking about the intriguing concept of the Semantic Bank at TNW Conference in May, check out our other great speakers here and don’t miss out on the Early Bird discount tickets.