“In a world of mobile and software and connectivity, how do we build a financial services platform to serve the majority of citizens so that managing and moving money is a right for all citizens and not a privilege for the affluent?”
That is the question Paypal CEO Dan Schulman posed today during the Global Fintech Revolution panel at the World Economic Forum. In a wide-ranging discsussion, Schulman and other experts outlined some of the key challenges financial and technology firms will face in trying to answer that question.
Be it checks, credit cards, online payments, or mobile phone payment apps, the look and feel of money has evolved for decades. Cash will always play a role in society, but the Davos panel sees the percentage of digital transaction increasing dramatically. Swedish Central Bank Deputy Governor Cecilia Skingsley said her institution is even experimenting with a digital form of the country's official currency.
The rapid global adoption of mobile phones has also spurred the development of accompanying apps for mobile banking and other financial services.
"Mobile puts all the power of a bank branch in the palm of people's hand," explained Schulman.
According to Eric Jing, the CEO of Alipay parent company Ant Financial Services, people in some of the most remote regions of China have been brought into the greater economy and had their lives dramatically simplified by mobile financial services. And the amazing thing is that some services, like Alipay, have enjoyed massive adoption wile morhping away from their original functionality.
"Alipay was not created to provide a payment solution. Actually, it was created to solve the issue of trust barrier," Jing explained. "We created a kind of escrow payment.”
Perhaps "escrow" is an appropriate word because the crux of all this fintech development is trust. Consumers want simple apps and technologies, but first and foremost is trust. How firms go about building - and maintaining - that trust is a comlex challenge. As with most things these days, cybersecurity is a key factor. The influx of tech firms and talent from Silicon Valley has had a positive impact on the fintech ecosphere because cybersecurity is a foundational given. Schulman says Paypal uses the data it collects to look for abnormalities in individual transactions and in the system as a whole.
There is also the question of reputational trust. Schulman pointed out that the same tech firms that pride themseves on their cyber know-how also bring strong reputations to the table. Younger consumers who have grown up in a digital world simply trust tech firms. After all, consumers are adopting services like Apple Pay and Android Pay; not Bank of America Pay or Goldman Sachs Pay.
Skingsley acknowleged the point about tech firms enjoying strong reputations, but cautioned that such affinities can change and citied the glowing reputations some legacy banks enjoyed pre-2008.
But there are also factors outside Silicon Valley that are spurring the onslaught of new fintech developments. David Craig, president of Financial and Risk for Thomson Reuters, says the financial crisis even deserves some credit for the timing of legacy banks getting onboard the fintech train.
“The financial industry spent 7 years basically focusing on safety and compliance. There has been a pent-up demand, particularly among customers, to innovate and deliver better services. We are seeing a backlog of ideas coming forward,” Craig said.
Ultimately, the road to greater fintech advancement in not paved with gold and Bitcoin. There are privacy and security concerns that need to be addressed while also ensuring the user experience appeals to the masses. The digitialization of global society means there won't be thousands of solutions scattered around the world for every consumer needs, but rather a limited number - perhaps a couple dozen - that achieve cross-border penetration and shape they way cash flows and people interact.
Perhaps Schulman, who is a laid-back eccentric by Davos standards, summarized the goal of fintech best when he concluded his comments in rather kumbaya fashion: “It is like waves on the sand. None of us are going to stop this from moving forward. We need to figure out how to make it as safe as possible and how we advance it. Because if you can, the value and the inclusion that creates could really make a difference in the lives of so many people.”