FinTech vs. TechFin: Where is the Global Finance Economy Headed?

“There are two big opportunities in the future financial industry. One is online banking, where all the financial institutions go online; the other is internet finance, which is purely led by outsiders.” – Jack Ma

The Finance and banking economy across the whole globe is facing a new level influx of changes coming its way since the past many years. And the changes are in no way showing a picture of stoppage – giving no breather to the finance sector to hold and react.

First from a traditional banking system to digital then from fiat currency to digital currency, and now while the Finance world was still getting habitual to all this modernism, a new trend entered the domain, introducing itself as the future finance and banking ecosystem.

This latest trend in banking technology that is soon making an entry in the world is TechFin. But what is TechFin? And what impact would it carry?

This latest trend in banking technology that is soon making an entry in the world is TechFin. But what is TechFin? And what impact would it carry?

While closely resembling the concept that we have already seen and warmed up to, FinTech, the idea in itself is very different. Something that is now slowly causing the rise in search engine queries and queries that financial software development agencies are receiving: FinTech vs TechFin: Is there a difference? And if there is, then where the future of Finance and Banking lies between TechFin and FinTech?

Let us try to look at the answer of both in this piece.

The beginning of modern financial software development began roughly 10 years ago during the global financial crisis, which convinced the incumbents that they were fighting for survival. This provided a great deal of room for innovators to build businesses, and this is when Square got started, which was a seminal moment.

And as the economy got stable, so did the hold of players who entered with the support of financial application development companies to take some of the banking work away from banks. Ever since Square and PayPal, the innovations in Finance industry saw no stopping. One after another new offerings kept coming in the domain, promising to set newer standards in user experience.

And the movement that started then has today come to a point which was difficult to imagine years ago – the stage where tech and finance merge.

While FinTech had already created a pivotal position in the users’ life, TechFin – a.k.a the movement – is something that will bring a monumental shift in not just the use of financial institutions but also the reason for their existence.

Before we move on to the phases of how FinTech came into existing and where the future of FinTech is headed – TechFin, let me answer the glaring question first – FinTech vs TechFin: What is the difference. For the article will only dissect the other in much detail from here on.

Difference Between FinTech vs TechFin

Putting it simply, FinTech is the concept where the Finance industry starts using technology to offer better customer experience. TechFin solutions are where the Technology Domain enters the Finance sector to change how users interact with the industry.

The examples of TechFin organizations include Google, Amazon, Facebook and Apple (GAFA) in the U.S. and Baidu, Alibaba & Tencent (BAT) in China.

Now that we have looked at what differentiates both the concept, let us talk about the different phases that the Finance sector has seen and identify the space where TechFin entered.

The Evolution of Finance and Technology

The rate at which the Finance and technology industry is evolving is one that is in many ways bringing a stark transformation in the domain. What was Finance decades before is not what it is now and won’t be the same next decade. Let us track the steps of Finance and Technology’s unison movement.

Stage 1: Exclusion

The first step of fintech or techfin evolution is the era when there was no technology in the picture. Financial consumers had to wait in long lines in banks to perform any and all types of money related work.

Stage 2: Mobile Payments

The next phase was when payments – a small fragment of the banking sector came on mobile banking services. Users now standing in queues were making payments of bills, electricity, and water on mobile through apps that came majorly from non-banking institutions.

Stage 3: Mobile Basic Banking – The Now

Seeing the ease that this digital revolution in finance was offering to the millions of their user base, a number of banking institutions also entered the space by developing a financial application for their bank.

Meanwhile, the non-banking technology companies too expanded their offerings and entered services like lending, credit facility etc. This stage, right here is where the Finance industry entered into a competition with technology firms to emerge as the best service provider – the stage which was known in the fintech app development world as online banking.

Stage 4: Full-Service Mobile Banking – The Future of Banking Technology 2020

The stage where the Finance and technology combination is headed on to next, is one where the competition that started in stage four only becomes much cut-throat. The time to come is set to move from FinTech to TechFin. The technology based companies who made an entry in the banking services will only make their presence stronger and the Financial institutions will start involving technology at a greater level in their processes.

Since we have looked into both – what differentiated FinTech from TechFin and the evolution of Finance, it is time to give an in-depth share of attention to what is TechFin and what are TechFin benefits, at the outlook of the basis on which it operates and where does the future of financial services industry lies.

The Basis of TechFin Ecosystem

A. Customer Base That is Willing to Experiment

The biggest perk that operates in the favour of TechFin is the fact that the user base that a technology firm is able to attract. A number that almost always is much greater than the number of users a finance firm is able to acquire.

One of the reasons why technical companies are able to attract more users through their finance app development effort is also because of the subconscious image. When someone uses a banking app, there is a subconscious fear of something going wrong, while the same is not there when the app offering the same service comes from a non-banking parent company.

Lastly, the consumer base that is present in the case of TechFin apps is a lot more diverse as compared to the restricted FinTech user group.

Lastly, the consumer base that is present in case of TechFin apps is a lot more diverse as compared to the restricted FinTech user group.

B. A Strong Technical Infrastructure

The reason why technological firms have an upper hand when it comes to boasting their infrastructure excellence is very obvious. When a technology firm enters the finance domain, it is already armored to handle the user flow of millions in real-time.

After all, even in the race of coming out as the ultimate finance sector leaders, the finance companies take help of technical firms to help develop their infrastructure. This partnership is a key enabler of the future of the financial industry. 

C. Better Mechanisms of Data Management

The whole data related cycle in case of TechFin firms is a lot better than that of FinTech agencies. The difference in how well the data flows in TechFin vs FinTech can be seen in the simple fact how users are a lot more comfortable sharing their data with Technological firms as compared to Financial.

While on the one hand, one of the biggest challenges of banking software development is to get quality data out of the users, the technological firms, on the other hand, simply have to give the users a form and they themselves send it back, all filled.

In addition to this, the system and algorithms needed to manage data are in themselves a lot more readily available to a technological company than their financial counterparts.

D. Similar Regulation Set

Unlike normally assumed, the level of regulation levied on technological firms that enter the finance domain are the same as the financial institution’s who involve technology in their offerings. So, there is hardly any legality that is standing in front of TechFin as a roadblock.

The TechFin segment of the Finance sector, as we just read, is paving the grounds to enter and transform the segment. But does it mean the end of traditional banking as we know it?

The answer of where is the future of finance, lies with the finance economy itself. The truth is, the time will come when TechFin and FinTech companies will merge and their offerings will become similar if not competitive.

And when the time does come, the true benefit will lie in FinTech collaborating with TechFin and becoming one with the latter. For, individually, both domains, no matter how far and big they grow, will have some spaces left to be filled. Plus, the mix of subconscious carefulness and easy flowing user experience will only be achieved upon the transformation of FinTech into TechFin. Now, whether the merger happens or not, one thing is certain – the Banking industry is destined to change and Fintech transformation is bound to happen. It is not going to be the ecosystem that Generation X operated in.

THE AUTHOR

Sudeep Srivastava

Co-Founder and Director