FINTECH – A Revolution or a Transitory Hype?

by Imad A. Moosa

published by Edward Elgar Publishing, UK & USA

It is probable that there havn’t been years within the history of the financial services industry wherein more new buzz­words were created than during the last two decades. ‘Fintech’ (finance technology), and ‘Regtech’ (regulatory technology), are but two of them.

The term fintech only made it to the Merriam-Webster Dictionary in 2018 and was beaten to there by other similar buzz­words (‘crypto’, ‘blockchain’, ‘bailins’, ‘digitilisation’, and even acronyms from EU directives). A possible consequence could often be that many who in their reading come across such terms would gloss over them and simply move on, with the intention often being that of gathering ‘something’ as they go along or from the general thrust of what is being read.

And, perhaps, such an approach must also not be totally condemned. But economics professor Imad Moosa from the University of Kuwait has, specifically with regard to this term ‘fintech’, now made a solid attempt to ensure that both readers of his book and FS practitioners fill their ‘tank’ with indeed much more than perfunctory understanding of the term.

The result is a very insightful study of what fintech is, what it isn’t, what it has done so far to the FS industry, and what it can be expected to be doing going forward into a future. Re the latter, of course, the future of the technology will not lie only in itself, but also in that in the possession of regulators who, now using new ‘regtech’, it will be made sure that, for example, fintech-related fraud will not raise its head to any levels which damage economies.

Fintech, of course, is now big, to the point of almost totally encompassing all transactions taking place every second within the FS industry, both domestic and across national frontiers. It has grown rapidly, and we are indeed now well beyond the stage when it was being introduced through what Moosa describes as “ripple”. This has gone from beyond the many definitions themselves of fintech (Leong and Sung 2018, emphasising multidisciplinarity; Zavolokina 2016, seeing its definitional ambiguity; Arner 2015, who gets closest to its basic character, and others), to media-hashed definitions, and then to others structured by international bodies. One finds all of these in this wonderful book.

Chapter Two of this study goes in depth into the process of fintech’s growth. Moosa holds that, in a broad sense, the fintech industry has originally evolved from what he sees as fragmented use of technology in the provision of financial services. But in his evident enthusiasm for the discipline, he doesn’t stay shy of seeing the process go from evolution into revolution, from what was originally fragmented use of technology in the provision of financial services to now an industry which employs millions and is constantly coming up with new products and servicing many sectors of many economies.

For example, according to Walden and Foreman (2020), consumer perceptions of online banking are shifting. And this, of course, beckons discussion on whether the reckless imposers of fintech technology on financial services consumers, whether this is done in methods that rather than lead to seeing fintech as a financial lifeline, pushes them to, in fact, seriously asking whether they are better off now than in the past.

Fintech has serious implications for financial stability as well as for both professional and general societal inclusion

This reviewer has supervised research into what turns certain parts of society into ‘adopters’, and what equally makes others perennially ‘non-adopters’ of contemporary banking fintech, and indeed the answer will lie in even more than just a deep study of only fintech.

The growth of fintech across practically the whole world has certainly done its bit towards hammering FS market structures, and consequently, of course, nations’ economies. The author lists some 40 different activities that all leading fintech organisations engage in, and their focus is both at the back end of FS company systems as well as, of course, the more consumer focused activity. The technology itself, of course, is what both fascinates and beguiles many people.

Fintech encompasses many aspects of contemporary life. Photo: Shutterstock.com

In what is potentially the book’s most engaging chapter (Four), most of what fintech has brought in either its wake, or even, as some would hold, as part of itself, here we get absorbing treatment of AI, of 26 different social and economic sectors, of machine learning, big data structuring and management, of quantum computing, the Internet of Things, aggregation processes, cloud computing, biometrics and biometrics identification, blockchain technology, and of course, the aforesaid regtech (banking supervision, transaction monitoring, and some 20 different regulatory functions).

In 2018, Rooney argued that “Fintech may be one of the few industries looking back fondly at what happened in Wall Street after 2018”. The objective reality is that fintech has both costs and benefits, advantages and disadvantages. And Moosa’s treatment of these rea­lities (interestingly coming before chapters about the war on cash (a full 22 pages), about whether cryptocurrencies are an innovation or a scam, (28 pages) is, in the writer’s extremely down-to-earth writing style, very fair and objective, and certainly not a study of some contemporary hype.

Fintech has serious implications for financial stability as well as for both professional and general societal inclusion. As such, its on-the-ground practising, as either a discipline or as just a new industrial sector, cannot but be a source of much concern for FS regulators specifically, and for attentive observers of the day-to-day realities of the financial world.

The need for regulating it as part of the ongoing war on financial fraud, on Ponzi schemes, on indeed technology-enabled fraud, on scams, scandals and even corporate failures in a general sense, these are all part of the regulatory reality of the world of fintech. Is all of this universally accepted? That is possibly very doubtful.

But it would be nice to think that in academic circles, where much teaching of the new world of banking and financial services takes place, a book like this becomes de rigueur reading for all on all sides of the teaching and learning fence. Indeed, a wonderful book that superbly treats this fascinating reality of today’s FS world. Very strongly recommended.

John Consiglio teaches banking regulation at the University of Malta.