1. Kerényi Ádám Szegedi Tudományegyetem
Fintech is the new normal? Challenges in national and international economic policies 3rd Central European PhD Workshop on Economic Policy and Crisis Management Doctoral School in Economics, University of Szeged 13 April 2018, Szeged, Hungary Session 5 –Technology and competitiveness Room: KO 108 Chair: György Málovics
Kerényi Ádám
Szegedi Tudományegyetem

2. Introduction
I am a junior research fellow at the Institute of World Economics of Hungarian Academy of Sciences.
My other commitments:
I am a controller at SOLVO Biotechnology
I teach at the University of Szeged.

3. https://www. google. hu/url

4. http://english. hitelintezetiszemle

5. The term of Digital Economy
The term Digital Economy was first coined by Don Tapscott’s 1995 book “The Digital Economy: Promise and Peril in the Age of Networked Intelligence”. Digital economy = New economy = Knowledge based economy The digital economy refers to a broad range of economic activities Digital is the new normal
The term of Digital UK: dɪʤɪtl Economy
The term Digital Economy was first put forward Don Tapscott’s 1995 book “The Digital Economy: Promise UK: prɔmɪs and Peril UK: perəl in the Age of Networked Intelligence”.
Digital economy = New economy = Equals to UK: iːkwəl
D. TAPSCOTTS
1947-

6. Digital finances
As digital is the new normal, digitalization and technological modernization are inevitable and integral parts of financial development.
Financial technology means financial innovation brought by technology.
Technical advance is the cause  financial innovation is the result.
Fintech has rich connotation, and will be a trend of financial development with the ceaseless technical progress.

7. The incumbents
Banks
remain systemically important to the real economy;
at the same time are highly regulated institutions;
enjoy huge advantages in terms of their collective customer base and the data they hold on their clients.
are the major repository for deposits
customers largely identify them as with their primary financial relationship
still attract the bulk of requests for credit
are the gateways to the world’s largest payment systems

8. The Fintech ”industry”
FinTech Unicorns
Incumbent Banks
Established non-bank players
Regulators
FinTech startups
Venture Capitals
The use of technologies by financial services firms is not new per se. Fintech is relevant for multiple sectors, beyond banks
Source: McKinsey, 2015

9. Factors, which drive the rise of FinTech
FinTechs are attacking a huge profit pool of $1.291 trillion
The financial crisis had a negative impact on trust in the banking system.
The ubiquity of mobile devices has begun to undercut the advantages of physical distribution that banks previously enjoyed.
Massive increase in the availability of widely accessible globally transparent data, coupled with a significant decrease in the cost of computing power.
Source: McKinsey, 2016

10. The FinTech services and products diffuse across the financial industry’s market segments and along its value chain.
Forrás:

11. The emergence of the FinTech-phenomenon
Tech startups are booming. At last count 233 startups had achieved “unicorn” status (implied valuations of more than $1 billion).
A big focus of the new startup boom is financial services. The third largest share of the world’s unicorns are in financial services (~11%, 26 companies).

12. Investment historic data and actual trends in fintech
Global investment activity (Venture Capital, Private Equity and Merger & Acquisition) in fintech companies 2010 – Q4'17 Deal Value ($Billion)
Source (KPMG 2018, p.10). Note: Source: Pulse of Fintech Q4'17, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook) February 13, 2018.

13. The level of FinTech financing is booming Investments in FinTechs 2008-2017
Funding is ballooning.
Since 2008 $B 165 has been invested in FinTech companies throughout 7,500 deals
Globally, nearly $ 165 billion of venture capital and growth equity has been deployed to FinTechs over the decade, and this number is growing quickly.
Total global investment in FinTech companies - USD billions
Source: KPMG 2016, 2018, PitchBook, 2018

14. Source: Glance Technologies Desjardins 2016
Amazingly, the 27 fintech unicorns have only been born in six countries: United States, China, Sweden, India, the Netherlands, and the UK.
The United States has more than half of all fintech unicorns (14), including nine in Silicon Valley. China has eight unicorns, while the UK has two. Sweden, India, and the Netherlands each have one.
While the U.S. can say it is home to more unicorns, the Chinese ones have far more value so far. The biggest four fintech unicorns worldwide were all born in China: Ant Financial ($60 billion), Lufax ($18.5 billion), JD Finance ($7 billion), and Qufenqi ($5.9 billion). This is because China has more than 500 million smartphone users, with a more evolved market for payments and P2P lending.
Source: Glance Technologies Desjardins 2016

15. Expanding scope
Where once companies focused on payment applications, lending, and money transfers, the industry’s reach has extended into more than 30 areas. The shift brings fintechs away from a focus on frontline activities to a broad engagement throughout the value chain. The fintech industry is also becoming more diversified, with a wide variety of business models seen across geographies, segments, and technologies.
Source: Dietz et al. 2018

16. Expanding scope
Fintechs are moving beyond addressing a customer’s financial needs to offering a wider range of services, blurring the industry’s boundaries.
Social Finance, known generally as SoFi expanded to provide career coaching and networking services.
Holvi Payment Services, a Finnish start-up expanded to provide complementary offerings, such as an online sales platform, bookkeeping services, expense-claims systems, and a cash-flow tracker.
Social Finance, known generally as SoFi, began by offering financial products to students and young professionals and has since expanded to provide career coaching and networking services.
Holvi Payment Services, a Finnish start-up began by offering banking services to SMEs and expanded to provide complementary offerings, such as an online sales platform, bookkeeping services, expense-claims systems, and a cash-flow tracker.
Source: Dietz et al. 2018

17. The emergence of the FinTech-phenomenon
Banks are investing heavily in order to fend off the FinTech newcomers and keep the all-important customer relationship, or cooperate with them.
The most forward-looking banks will not just survive the wave of digital disruption, but will thrive, as these FinTech-driven challengers gain momentum.
Banks and Fintech firms have more business interests in common than issues that divide them.

18. Recent partnerships between banks and FinTech startups, selected examples

19. Bigtech companies
In the future information technology communication and social behemoths (Google, Apple, Facebook, Amazon, Alibaba) might take leader role in the financial industry
As Jack Ma told there is techfin rather than fintech
Bill Gates said that banking is necessary, banks are not
There might be an environment of banking without banks

21. Conclusion
Fintech has rich connotation, and will be a trend of financial development with the ceaseless technical progress.
FinTechs are attacking a huge profit pool
Banks are investing heavily in order to fend off the FinTech newcomers and keep the all-important customer relationship, or cooperate with them.
Financial technology will transform a great part of the banking industry, fundamental challenge is to meet the potential risks and regulatory obligations of this development.

22. Further research agenda
My future research topics are
Regulation, supervisory aspects
In Hungary
In EU
Globally
Competition & cooperation between incumbent banks & fintech startups
Virtual currencies
Central banks’ role
I want to make interviews
Attend workshops, conferences
Publishing the results

23. Thank you for your kind attention!

24. The scope of products and services offered by fintechs is expanding rapidly.
Source: Dietz et al. 2018