2017: The year fin-tech friendship bears fruit

Sidhartha ShuklaMoneycontrol"First they ignore you, then they laugh at you, then they fight you, then you win," Mahatma Gandhi may have said these words against the British but they also echo with the reception fintech innovations have received since their inception.

Fintechs, the collective term for start-ups using technology to make financial services more effective and streamline were earlier publicized as a threat to conventional banking and met with considerable resistance and criticism in the earlier days.

Back in 2016, Citigroup's fintech analysts led by Ronit Ghose wrote in a report: “We see the advent of robo-advice as an example of automation improving the productivity of traditional investment advisers, and not a situation where there is significant risk of job substitution. Higher net worth or more sophisticated investors will, in our view, always demand face-to-face advice.”

On more disruptive tech like bitcoin and blockchain, JPMorgan CEO Jamie Dimon had said, “This is my personal opinion, there will be no real, non-controlled currency in the world.”

“There is no government that’s going to put up with it [bitcoin] for long … there will be no currency that gets around government controls,” he further added.

Bitcoins also had to face the heavy arsenal assault of banks back in 2013 when banks around the world, particularly in the US, closed down accounts of bitcoin startups and even bitcoin-accepting businesses.

Many said that it was the fear of competition and some opined that it was regulatory risk which led to such harsh measures.

All the above skepticism has been proved to be wrong as bitcoins have not only survived but were the best performing currency two years in a row and fintech adoption has been flourishing in the recent years.

Once fearful of fintech disruption, Wallstreet and banks now seem to have warmed up and embraced the idea as it can reduce their complexities and add more to their net-profits each year.

An analysis by McKinsey suggests that the structure of the fintech industry is changing and that a new spirit of cooperation between fintechs and incumbents is developing.

"Over the past year, Asia has dominated the fintech investment scene, with nearly as much investment in the first 3 quarters of 2016 as in all of 2015. China-based fintech companies have done especially well, with unicorn companies such as Ant Financial, JD Finance and Lufax continuing to grow and attract investment both domestically and globally," a report by CB Insights said.

On Monday, Axis Bank became the third lender in India to announce usage of blockchain solutions for its operations, after its peers ICICI Bank and Yes Bank.

Axis Bank has tied up with fintech firm Ripple to use blockchain technology for cross-border remittances.

As opposed to a few days, Ripple’s distributed financial technology enables banks to send real-time international payments across networks.

Earlier this month, Yes Bank, announced that it has implemented a multi-nodal Blockchain transaction to fully digitize vendor financing for its client Bajaj Electricals. The implementation has been done on a blockchain-based smart contract written by fintech start-up Cateina Technologies.

Being cheaper, quicker, safer and more transparent, fintechs have now formed a mutual friendship with banks and have the potential to help them save millions in collateral and settlement costs while streamlining the entire banking model.

After gaining acceptance in the past few years, this collaboration between incumbents and new-comers is ready to bear fruit this year.

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