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The Internet has changed many things. It has changed our working habits. Now we more and more want to work from anywhere than on-site. We can very happily shop from the comfort of our couch and also can do many of our financial tasks on the go. All this has been made possible by the ubiquitous internet and mobile technologies. Many new terms are being invented e.g. Crowdfunding, DeFi, Crowdsourcing and FinTech to name a few.
One of the latest buzzwords in the realm of finance is FinTech. What is it? FinTech is a fusion of financial services and technology. It uses the latest computer and communication technologies to provide all kinds of financial services e.g. ATMs, CDMs, Virtual Credit Card, Mobile Banking and instant payment amongst others.
FinTech is relatively a new word but the use of technology to provide financial services dates back decades. ATMs were once considered at the cutting edge of FinTech as was signature verifying technology that was first used in the 1860s. Early on the name FinTech was attached to Silicon Valley startups that aimed to disrupt the established players but now the very players are adopting FinTech. Businesses have come to rely on FinTech for payments processing, e-commerce transactions, accounting and, more recently, in the wake of the COVID-19 pandemic, they are turning to FinTech to enable features like contactless payments or other tech-fueled transactions.
FinTech ushers in a new era of expediency. It helps expedite processes that once took days, like sending an international money transfer. There’s been speculation about how fintech might help expedite traditionally red-tape-bound processes like opening bank accounts, loan processing etc. Fintech also holds the potential to improve financial inclusion: In some parts of the world, fintech fills needs for the unbanked, where governmental or institutional support is lacking. Because now banks are offering banking services like account opening, money transfers, bill payments through smartphone apps.
Consumers trust FinTech according to an EY report - 68% of respondents show willingness to use financial tools developed by nontraditional (that is, nonfinancial) institutions and 89% of SME adopters reported being willing to share data with fintech companies. But it is still early to say that this trust is well-founded, or if the benefits outweigh the potential risks. Many FinTech platforms are still unregulated particularly in the area of cryptocurrencies and blockchain. It can lead to unwanted or unexpected threat exposure. Only time will tell but so far so good. It’s prudent to approach FinTechs and their lofty promises with a healthy dose of skepticism. Consumers show their wariness: 71% of fintech adopters checked the affirmative for the EY survey question, "I worry about the security of my personal data when dealing with companies online."
Pakistan also aims to adopt FinTech to benefit its growing population of adults. So in 2015 it published its first National Financial Inclusion Strategy (NFIS) which had a target of including 50 percent of the adult population by 2020. This target was then revised to ’65 million digital accounts by 2023’ in the updated NFIS in 2018. Alongside this revised target, there has been an increased concentration towards utilizing Digital Financial Services (DFS), recognizing its importance of reaching underserved areas and unserved populations and its accompanying convenience for users. State Bank of Pakistan (SBP) introduced branchless banking licensing in 2008 that served as an impetus for Digital Financial Service Providers (DFSPs) to construct agent networks throughout the country and aggressively move towards branchless banking. EasyPaisa was the first mover in the branchless banking space and swiftly captured a significant market share, given the ease of access and convenience that the platform provided. More than 10 market players eventually entered the digital finance space, out of which two players (Easyapaisa and JazzCash) currently serve almost 70 percent of the branchless banking users.
SBP has introduced RAAST as an instant payment system that will enable end-to-end digital payments among individuals, businesses and government entities instantaneously. The state-of-the-art Pakistan’s Faster Payment System will be used to settle small-value retail payments in real time while at the same time provide a cheap and universal access to all players in the financial industry including commercial banks, microfinance banks, government entities and fintechs (EMIs & PSPs). Under Raast P2P fund transfers and settlement services, bank customers would be able to send and receive funds in their accounts using their bank’s mobile apps,internet banking or over the counter services. To facilitate their customers, banks will also allow them to create a Raast ID by linking their preferred International Bank Account Number (IBAN) with their registered mobile phone number. The customers can then share Raast ID with others to receive funds in their account. Bank customers can use Raast service for sending or receiving funds using their IBANs even if they do not have a Raast ID.
The future holds promising news for FinTech. It is here to stay and flourish. Use your mobile to have a RAAST ID and enjoy FinTech.
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