Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Saturday 28 May 2016

New exciting technology in an ancient system


The modern banking and finance system that we all know of isn't really all that modern and tech-savvy. With a model that existed for decades or even centuries, the finance industry has one of the highest resistance to new technology. Only up till recently, with fear of how start-ups are able to disrupt their shares of the pie, they are opening up to collaborate to improve the uptake of technology into the system.

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Even so, the latest technology adoption with significant impact on consumers is mobile banking and internet banking. In terms of distribution channels, the banks are now able to spread across the country without relying on brick-and-mortar branches which could cost a serious dent in their profits. However, all these are under threat as tech giants release more services such as Apple Pay and Google Wallet which could steal transactions away from the banks.

While all these innovations alter how we interact with the banks, hence making it more convenient for consumers, it has not significantly reduced the processing time which the banks need to accommodate these advances. This is due to the fact that money is moving at a faster rate and even with the adoption of technology only being able to keep up with the movements of money. However, all these are going to change with a new technology that surfaced in the cryptocurrency - Bitcoin. The next possible FinTech disruptor could be using blockchain technology.



The blockchain technology, in simple terms, refers to a public online ledger account, where transactions and data are recorded. It is hardened against tampering, viewable to the public, hence making it transparent and also decentralised. A single unit of the blockchain is named as a block, where multiple of such forms a chain, with information such as timestamp and other important data relating to the previous one. All these data stored in the blockchain are then processed together by those with the necessary computing powers (this is called mining). This gave the blockchain technology the decentralisation function, where no one centralised party are able to affect the decisions of the group.

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The problem with the current banking method is that there is numerous reconciliation of accounts between numerous parties, resulting in time wasted on processing. By adopting blockchain, banks are now able to settle transactions at a faster rate as there is a consolidated account where it is easily viewable to all. To an industry that is plagued with honesty and trust issues, this new technology could be what will restore faith in consumers.

This new technology has also led to many different variations other than the cryptocurrency. An example is the Decentralised autonomous organization, where the first fund created has more than $100M. This fund collectively votes for certain investment or project to invest their funds without any recognisable leader. While this is entirely new, it is currently more of a social experiment of how such funds will work in the future as well as the theory of collective intelligence.

We will be coming out more exciting news on FinTech and if you have any questions or existing discussions, do comment below!
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