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

By Sudeep Srivastav
April 22, 2019 2. min read
Last update on: July 16, 2020

“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 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 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?

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 all asking the same question – 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 FinTech 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 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 came 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 of 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.

FinTech vs TechFin

Putting it simply, FinTech is the concept where Finance industry start using technology to offer better customer experience. TechFin solutions are where Technology Domain enters 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 Finance sector has seen and identify the space where TechFin entered.

The Evolution of Finance and Technology

The rate at which Finance industry is evolving is one that is in many ways bringing a stark transformation in the domain. What was Finance decade 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.

The Evolution of Finance and Technology

Stage 1: Exclusion

The first step of Finance 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 type of money related work.

Stage 2: Mobile Payments

The next phase was when payments – a small fragment of 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 as FinTech online banking.

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

The stage where the Finance industry 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.

The Basis of TechFin Ecosystem

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 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 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 are 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.

C. Better Mechanisms of Data Management

The whole data related cycle in case of TechFin firms are a lot better than that of FinTech agencies. The difference in how well the data flows in FinTech vs TechFin 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, banks have to struggle and face several challenges 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 ready 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 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 Finance sector, as we just read is paving the grounds to enter and transform the segment. But does it mean the end of the traditional banking as we know it?

The answer of where is the future of finance, lies with 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 – Banking industry is destined to change and not be the ecosystem that Generation X operated in. And the question why fintech is the future is going to be contested.

Sudeep Srivastav
Sudeep Srivastav
CEO, Appinventiv
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