Revolutionizing the Financial Markets

4
Editor's Letter
A New Year
and a different one
The world has changed since Sibos.
What are the implications
for FinTech?
Andrew Hutchings,
Editor-In-Chief
The volatility in global markets through the first
trading days of 2016 provide a clear signal that,
for better or worse, 2016 is likely to be a different
year to 2015. The U.S. Federal Reserve has actually
begun to lift interest rates. Energy prices have fallen
sharply relative to where they were in January 2015,
and they had already been sliding for a while at that
time. The International Monetary Fund has revised
down its economic growth forecasts further. And
the geopolitical risks have been increasing – thanks
mainly to developments in Europe. The moves by
governments within the European Union – in the wake
of the arrival of a wave of refugees from the Middle
East (and elsewhere) and the terrorist attacks in Paris
– to restrict free movement of people across national
borders represents a huge rethinking of the entire
European project. It has become easier everywhere to
identify politicians who advocate populist solutions.
In short, recent developments are consistent with
less trade, less economic and political cooperation
and less expansion for many (but emphatically
not all) countries. The pace of globalisation has
slowed in the last few months. Governments are
placing greater emphasis on compliance, regulation
and – for financial institutions – Knowing Your
Customer. There is an opportunity for any FinTech
company that can help financial institutions to turn
compliance into a source of competitive advantage.
The bank that can first meet the requirements of
regulators, across all the legacy infrastructure in the
various national markets in which it operates is the
bank that will enjoy an edge relative to its rivals.
There are other opportunities as well. Any
innovation that reduces the cost of payments is
one that promotes trade and growth in challenging
times. Reduced costs are associated with a move
towards immediate payments. Reduced costs also
come from greater usage of mobile payments.
Ultimately, it should be normal for individuals
and companies to use mobile devices to initiate
payments that are immediate and cross border.
Payment costs are like a regressive tax. They hit
poor individuals in developing countries harder than
rich individuals in developing countries, people in
developed countries and companies. The general
move towards lower payment costs should boost the
economic welfare of hundreds of millions
of people.
Of course, not everything will change in 2016.
Blockchain was the hot topic of Sibos 2015. One
certainty is that it will remain a topic of crucial
interest to FinTech companies, financial institutions
and the customers that they serve over the coming
year. Above all, Blockchain remains a wildcard. It
may be that its greatest impact is outside the still
slightly mysterious world of crypto currencies – as it
is used to support the global financial infrastructure.
And the infrastructure will continue to evolve, as
financial institutions work to address the limitations
of legacy systems.
Welcome to 2016. It will likely be a challenging
year for investors and financial institutions.
However, FinTech providers will be able to make it a
little less challenging.