THE POWER OF FINANCE AND INFORMATION

Standing out in the field of finance in the 21st century and focusing on technology, FinTech plays a critical role in the finance models of countries and companies

The changes in the fields of technology and informatics have a profound impact on banking, one of the actors that form the basis of the world economy and financial system. As a result of the emergence of new technologies, the financial sector is changing its dimension, and service channels are diversifying and differentiating. In today’s world, people no more ask if FinTech will be replacing banks. Because FinTech has now become the heart of banking. This is due to the fact that “information” harbours a huge power and FinTech’s capabilities are needed to access information. FinTech essentially represents an industry that serves the need. It is no coincidence that this concept first emerged with the 2008 crisis. Because the nodes created by the existing system brought new needs to the agenda, and thus, the rise of FinTechs began.

FAST AND CUSTOMISED SOLUTIONS MAKE FINTECH UNIQUE

How does the system work in FinTechs? Consider the fast-moving consumer goods (FMCG) industry. Here, you have a product development and innovation plan and 3-5 year strategies are determined within this scope. The relevant product is realised at the level of a production line. This is an example of typical innovation. However, FinTechs develop atypical innovation by nature. In other words, companies that are potential business partners leave a problem in the hands of FinTechs. For the company, such is often a puzzle proving to be difficult to detect and solve. In other words, the company realises that it cannot get out of the situation on its own. Here, FinTechs develop solutions to the specific problems of each customer to the extent of their capabilities. Furthermore, it is often a solution that it has not developed before, which is exactly how innovation occurs. This means that FinTechs often cannot plan innovation ahead of time. Even though this may seem like a handicap, it is actually the feature that differentiates FinTechs from large structures such as banks and gives them power when used rationally.

WHAT IS MEANT BY THIS POWER?

Atypical innovation development muscles make FinTechs fast, allowing them to integrate quickly and have the flexibility to develop almost company-specific solutions as they develop very different innovations for different sectors.

DIGITAL WALLETS ARE LIVING THEIR HEYDAY

The democratisation of money is one of the most important concepts that recently become a focal point for FinTechs. Within the framework of the opportunities offered by the digital world, a silent but rapid adaptation process is in progress in this direction. The recent innovations and developments in this field can be listed as follows:

-In this period, we witness the evolution of the preference for payment methods has evolved to mobile phone applications or digital wallets. Having produced the first paper money in history, China today leads the world by making 81 per cent of e-commerce expenditures and 56 per cent of POS expenditures over wallets. In India, where cash was dominant only a few years ago, there is a great acceleration in wallet and card usage due to the pandemic. In addition to these countries, research shows that countries such as Sweden, Denmark, and the Netherlands are rapidly adapting to the cashless society approach, while societies such as Japan, Germany and Italy are still relatively cash-prone.

In light of all this information, the Global Payments Report published by FIS this year states that cash payments are expected to decrease by 6 per cent by 2026. We have a long way ahead to become a cashless society, however, such developments are very exciting. Also, on top of the fact that the use of wallets is the fastest growing area of the FinTech industry all over the world, we see that it keeps gaining importance in Türkiye as well.

-At United Payment, which we call invisible finance and where I am the founder & CEO, the infrastructure we started to work on years ago through the “Fintech as a Service” approach has been making rapid progress. The report published by Lightyear Capital 2020 shows the estimation that embedded finance in various sectors will generate approximately USD 230 billion in revenue by 2025. We have witnessed that invisible finance is mostly applied in e-commerce sites in Türkiye, especially as of 2022. I believe that this is bound to spread to many different sectors in the upcoming period. Here, as an alternative to the “Buy now, pay later (BNPL)” companies that have recently become a part of our lives, we have also seen the example of “Save now, buy later (SNBL)”, which was recently implemented by a company called Savestrike in Germany in parallel with the fluctuations in the economy.

-The use of FinTech by the states is increasing day by day. FinTech also serves the social municipality a great deal. It allows them to reach masses that are perceived as minorities by financial systems such as “farmers” and “producers”, which brings along financial democratization. Using the city cards operated by us in many cities in Türkiye as United Payment, users can now buy coffee, eat, go to the cinema, and even producers can buy the fertiliser and diesel they need. By doing so, they can gain various advantages.

At this point, I would like to mention the digital wallet project we have recently launched with the Turkish Dairy Producers Center Union under the name of “SÜTBİR Card”. The application offers the advantage of saving many operational and temporal loads. The application offers producers free cash withdrawals from İşbank ATMs, discounted shopping opportunities from more than 70 workplaces, ease of transferring transactions to a digital platform, and secure shopping via the contactless SÜTBİR Card. At the point of FinTech use of states, citizens in Estonia can pay taxes via digital ID cards, while countries with their own CBDC (Central Bank Digital Currency) keep increasing day by day. The increase in digital currencies brought us to a process where the digital Euro discussions are on the agenda again.

-We witness many successful examples where the vast capabilities of artificial intelligence are combined with FinTech. It is a candidate to become an integral part of FinTech in issues such as the analysis of large amounts of financial data, identification of trends, assessment of risks and analysis of customer preferences. The use of AI is bound to become much more widespread and we will witness technologies where the relationship between artificial intelligence and FinTech is much stronger.

-Finally, we should definitely mention open banking as well, which is currently the dearest of the entire sector. Having started its journey in Türkiye in January 2023, Open Banking has yet to reach its potential. In the upcoming years, it will be allowing industry players to offer a much more personalised experience to their customers, while users will be able to use financial tools more effectively and make their financial moves based on data. In this sense, I firmly believe that we will see very good projects in our country.

TURKISH FINTECHS MADE THEIR DEBUT AT MONEY 20/20

After all the talk about FinTech, it would be a shame not to mention Money20/20, which took place in Amsterdam in recent weeks. In the event, issues such as the approach of managing all solutions from a single point, melting the regulatory authorities of the countries in the same pot as much as possible in regulatory solutions and evaluating their interoperability were discussed.

At Money 20/20, as the Fintech Committee under DEİK Digital Technologies Business Council, we arranged the “DEİK Pavilion”. We organised the participation of 8 promising FinTechs (Colendi, Figopara, Kolaybi, Secure Future, Innovance, OBSS, TRA Tech, Fimple Türkiye) in the event. We felt excited by the interest of Europe’s leading organisations in Turkish companies. I am sure that this interest will evolve into much more beautiful breakthroughs in the upcoming period. With its renewed brand identity United Payment was also among the main sponsors of the event.

In brief, the demand for FinTechs will keep increasing in terms of digitisation of money and reduction of operational burden. In the future, we will witness FinTechs becoming key players in the financial system and their influence gradually deepening in the industry. As the FinTech Committee under DEİK Digital Technologies Business Council, we will maintain our efforts to ensure that Turkish companies have a voice in the global arena and take their place among the first companies to respond to changing expectations.