Silly season is upon us.
Every Christmas period, I load up on every tacky item you can think of.
This year, I purchased a three-foot-high ‘3D’ reindeer stick figurine. The kids have dubbed him Rudolph.
My mother caught wind of my purchase. ‘Buy me two,’ she said. So I did. She said she’d send the money to my account.
That’s one of the greatest gifts of internet banking, isn’t it? A few clicks on the keyboard…and away the money goes. No more lugging cash around.
Yet here’s the thing: My folks bank with a different institution to me. So any transfers between our accounts requires at least 48 hours for the money to roll over…
Even though internet banking has been around for almost 20 years, it’s absurd that it still takes two days — sometimes longer — for cash to roll from one account into another.
Yet bitcoin’s arrival in 2009 proved that banking transactions could take place in real-time — not two days.
So why do we put up with major banks getting away with sluggish rollover times? We shouldn’t, but many people don’t know they have a choice.
Yet, while the Aussie banking industry is reasonably proactive when it comes to providing new tech for people, the US banking sector is much slower.
Two years ago, Nacha, the industry-owned group that sets the rules for automotive payments, sought to overhaul the system. Instead of the two-day lag most Americans put up with, Nacha wanted any payments made at 2:00pm on a weekday to roll over at 5:00pm that day.
For whatever reason, the US banking behemoths didn’t like it. They killed off the idea in August last year.
A select few dominant banks decided on the outcome for an entire industry. Smaller banks — and, most importantly, consumers — wanted a faster processing system.
Jason Marshall, a former payments executive at Walmart in the US, and now employee at payments fintech firm InComm, highlighted how skewed the banking sector really is:
‘In this space, a relatively small number of banks decide whether the progress happens. And with a lack of transparency, the small number of banks that hold back the payments system don’t even have to show their face.’
We have no idea which bank voted one way or the other.
Chances are, you could take a stab at guessing by looking at which top banking CEO is bashing bitcoin…
Perhaps we should thank these banks, though. Outdated attitudes are giving way to new ideas. The stagnant banking industry is enabling an entirely new sector to thrive.
The power of the banking system is exactly the reason why many people are so desperate to get outside it.
In my view, the fintech industry is going to challenge the existing banking system.
Each year, KPMG and H2 Ventures create a list of the top 100 fintech players around the world. The list is broken up into two segments: a top 50 based on innovation, capital raising and size; and an emerging 50.
China continues to have the biggest disruptors in the fintech space, with five Chinese companies filling out top 10 spots.
Australia, surprisingly, had three companies in the top 50. Small business lending firm Prospa came in at number 24. Whereas ‘buy now, pay later’ services ZipMoney and AfterPay Touch Group Ltd [ASX:APT] came in at 37 and 44 respectively.
What’s interesting to note is that there is one key attribute driving these fintech businesses. The majority are using data analytics and artificial intelligence as a basis for their business model.
Which means, for investors, there’s actually a couple of different ways you could piggyback the fintech boom.
Those interested in fintechs would most probably invest by buying stock of companies they like. However, Exponential Stock Investor editor Ryan Dinse isn’t interested in the fintech companies rounding out the global top 50.
Over the past three months, he’s put together a list of firms that would fall under the ‘game-changers’ of the industry. The very sort KPMG would describe as emerging companies — those pushing the envelope of the financial services industry.
In just one month, one of those stocks is already up 146%. Yet he has three more on his list that he reckons will do the same. Details here.
Editor, Markets & Money