The incursion of Blockchain and FinTech has evolved the financial system from the ground up. Both sectors are emerging rapidly and each represents new services and products that allow the creation of new markets. Jason Simon, an expert who for many years has focused on both areas, explains what links FinTech and blockchain technology.
Both sectors, together with the implementation of new technologies, offer alternatives to consumers either to invest or an alternative to the services provided by a traditional bank, as is the case with FinTech.
“First of all, the FinTech industry in recent years has taken relevance in the ecosystem and as an alternative for financial inclusion,” assures Simon. “These digital companies have raised the standards of user experience; it also involves new business models such as payment platforms, neobanks, crowdfunding, cryptocurrencies, and the blockchain itself.”
These technological, financial institutions create new operations and the association of new niches, thanks to technological advances. For example, we can hardly interact in the cryptocurrency market without a FinTech.
“On the blockchain development side, it frequently relates to cryptocurrencies, in particular, Bitcoin,” Rodriguez explains. “It’s not just about using this technology in cryptocurrencies. The level of the security posed by Blockchain would enable innovations in sectors such as robotics, security, logistics medicine, commerce, the automotive sector, among others.”
Both sectors operate from technology with the aim of providing an alternative to financial services. The creation of FinTech has developed new markets such as accessing alternative capital and digitized security systems, according to Simon’s analysis.
In these two cases, there is a combined power that redefines commercial and capital processes in the ecosystem. On the one hand, a digital platform as offered by FinTechs provides the infrastructure to interact, while Blockchain drives better security and efficiency.
FinTech institutions taking on blockchain technology make the startup ecosystem booming, according to Simon’s criteria. Currently, these business models drive four categories of solutions for users. These are business-to-business for banks, business-to-business for banking customers. business-to-customer for consumers and business-to-client for small businesses.
These types of both blockchain and FinTech projects are making inroads into new markets to access alternative capital. A clear example is Venture Capital investments that show interest in innovative and technological companies.
Venture capital firms generally invest in businesses with a long-term profit expectation and returns of at least 5 to 10 times more than a traditional investment. That’s where Blockchain and FinTech come in as emerging industries.
Financial sectors have had to recognize the importance of Blockchain and adapt their systems to incorporate this concept. As a result, specialized Blockchain departments have had to be created in almost all banks. However, the latest changes in the market have turned around what was happening so far.
“FinTechs have realized that human resources are starting to transform into the human keys, as they will be vital for all these entities, Simon points out. “For some time now, there has been talk in the industry about the constant transfer of Blockchain experts working in some of the largest companies in the financial sector to startups specializing in Blockchain, or who have directly created their own companies.”
It is curious that this is happening right now when, as we said, large entities are focusing on incorporating Blockchain into their banks, and are even giving those who are specialized in this type of bases some really enviable working conditions.
It is important to note that these experts are “moving” from the tranquility and security offered by traditional banking to start-ups, either as employees or as entrepreneurs, with the uncertainty that this entails.
Overall, global investment in financial technology companies by private equity investors is growing globally. However, the United States, Europe and Asia remain the preferred markets for investors.