Can fintech innovation affect economic growth?
Indeed, we live in an era of extraordinary technological advancement. Inquiring into its potential impact on financial markets and economies is interesting.
Developed nations all over the globe are now faced with the dilemma of how to boost their development potential after the fast expansion of the economy in the second part of the twentieth century. There were numerous big businesses in areas like iron and steel, cars, and petrochemicals that were created after 1900 when looking back at history.
A growing number of individuals believe that fast technological advancements will have a significant influence on the financial sector. These apparent links between current information technology and financial services, in my opinion, stem from two factors. Since many aspects of finance (such as payment and settlement, investment choices, and risk management) are dependent on extensive information processing, the financial service business might be classified as an “information industry.” Aside from that, new technologies like blockchain and distributed ledgers (DLT) may dramatically alter the foundation of financial activity, such as the currency and ledger systems. The focus of today’s meeting illustrates the numerous fascinating economic theory questions raised by these probable consequences of information technology on money and ledgers.
Fintech innovations and financial services
FinTech has the ability to “globalize” fundamental financial services by increasing “financial inclusion.” FinTech. FinTech has opened up the prospect of offering basic financial services through mobile devices in developing and emerging economies, not just in advanced economies but also in developing and emerging nations where financial services have not yet been established. The Forex market, the world’s biggest financial market, is one illustration of this.
This indicates that there are many traders participating in the FX market, and the need for financial services via the use of FinTech is increasing with time. Because of the rising number of Forex traders in the aforesaid market, there are many new forex brokers in the sector that employ various FinTech technologies to make things simpler for their clients and attract more new consumers. As a consequence, many traders look for forex broker reviews, which is one of the most frequent methods to learn about the services provided by the brokerage. Typically, Forex firms that embrace FinTech technologies are more popular among traders. Hence, FinTech has had a tremendous influence on the Forex market. FinTech businesses that are not banks, on the other hand, do not accept deposits of any kind. These services include P2P lending without the use of a company’s own balance sheet, as well as payment services. FinTech firms are also aiming to achieve “economies of scope” by merging financial services with other activities connected to e-commerce, sharing economy enterprises, and big data analytics in order to create additional added value.
New FinTech technology may also be utilized to explore the boundaries of financial services via “dynamic” customization. FinTech technologies. Insurers face an issue known as “moral hazard” when policyholders’ incentives to be careful are undermined by purchasing insurance policies. “Smart contracts” may be used for a wide range of applications, including altering automotive insurance premiums in line with the driving habits of individual policyholders. Smart contracts may be able to circumvent “moral hazard” by using modern information technologies, as this instance shows.
Fintech and economy
There’s no doubt that finance is a brilliant human invention. Humans are able to continually allocate scarce resources to productive locations with promise by employing highly complex information processing systems such as finance. As a result of this dynamic driving force, people have been able to establish an economic civilization. Innovation in FinTech and information technology will, in theory, have a positive impact on economic growth if it increases financial efficiency.
FinTech, in addition to that, is predicted to have a positive impact on the economy in this way. Existing economic data make it difficult to quantify the economic effects of FinTech in industrialized nations where basic financial services are widely available.
Economic statistics must be able to account for the benefits of information technology advancements, but this is a difficult problem. It may become more impossible to locate the “site” where transactions take place or where the essential ledgers are held if FinTech encourages economic transactions through the internet and smartphones as well as DLT-based business apps. It’s possible that this will lead to problems with regulation and taxes.
Singularly issuing sovereign money has been a function of most central banks since they were created when modern nation governments emerged. It is clear from the above examples that central banks are essentially “centralized bookkeepers.” When it comes to central banks, many are interested in how “decentralization-oriented” technologies like blockchain and DLT may affect the future of money and central banking.
Such curiosity is sparked by the issue of what would happen if digital currencies like bitcoin become widely used. There is little doubt that monetary policy will be affected if virtual currencies such as bitcoin are extensively utilized to buy goods and services. Virtual currencies, on the other hand, are not expected to overtake sovereign currencies at this time, according to several international forums.
