The future of Fintech startups is bright. The fact that Fintech technology has matured and that banks are becoming more involved in financing Fintech startups, contributes to and supports the future of these startups. It also supports the banks in banking the underbanked and offering assistance to those who never had access to banking services.
In June, PayPugs Board Chairman Alexander Zelinsky participated in the Horasis Global Meeting. Together with other Fintech and other industry leaders, Zelinsky took part in a panel discussion about the present situation in the Fintech industry and what opportunities blockchain technology presents to the financial services sector.
Fintech technology has matured
The Fintech industry, in general, is changing rapidly. Zelinsky pointed out that “at PayPugs for example, we see decisions and changes every week that impact our future operations”.
Currently, the Fintech industry revolves around collaboration more than ever. “For example, five to ten years ago, integrations and partnerships often took over a year to be developed and go active. Today, accessing new markets, developing relationships with partners, and gaining clients has never been easier. Most of the time such processes can be done in a matter of months or even weeks,” stated Zelinsky.
Moreover, the future development of Fintech also relies on a whole spectrum of new approaches in communication, tools, managing data, and adapting to the new generation and new ways of working. The challenge for Fintech companies is how to wisely use the available resources, customer information, and other data they have to hand in order to successfully access new markets. Overall, advanced technology is allowing interesting alliances to be developed for many reasons.
Zelinsky believes that initially, Fintech was seen as ‘competition’ by traditional banks because “we are providing new types of services”. Today banks see Fintech as cooperation partners. Zelinsky is of the opinion that “such collaborations are important for the future development of Fintech as we have to work together to achieve the goal of creating new generation financial services with a better user experience, interface, and values”.
“Overall, if we look at how Fintech was operated before and the constant changes we have seen, then I see the future development of Fintech growing even more,” believes Zelinsky.
Banks are becoming more involved in financing Fintechs
Zelinsky stated that “we see banks acquiring and investing in Fintech startups to service the new generation. I also have seen non-financial companies acquiring Fintech”. He went on to describe the recent acquisition of one Fintech company from the Baltics by the website browser Opera as an example. Unexpected collaborations and cases such as this raise our curiosity about the reasoning behind such a decision and the changes in the economic landscape.
Additionally, the view of how Fintech should be managed should change. Zelinsky suggests that one way to achieve this is by “thinking on a global scale rather than finding a discrete solution for one or two markets”.
The challenges PayPugs face with regards to the different regulations in every country
Zelinsky noted that PayPugs has had an interesting journey thus far: “The process has been interesting rather than complicated. We have been fortunate to be a part of different projects that provide regulatory solutions that we had never heard of before”.
Furthermore, governmental bodies are also starting to understand how Fintech companies can change their approach to different financial services. Zelinsky pointed out a situation that perfectly sums it up: “just recently we had a case of onboarding a Spanish entity. While they are being regulated for AML and KYC by the Central Bank, they do not have a license, meaning that a normal bank would not accept them”.
Then the question is asked ‘who will service such a company?’ Overall, as many governmental entities are understanding Fintech and what they can do, more opportunities are opening up with new laws and regulations being introduced in different countries.
The purpose of banking-as-a-service (BaaS)
PayPugs has developed such a solution. “Essentially it has been a great service as it is allowing us to service customers faster across different countries,” noted Zelinsky.
It has proven to be a working collaboration solution. By simply sharing profit, the client and the customers can both be satisfied, and everyone profits in the long term. Zelinsky explained that at PayPugs for example, Ukraine was never on their radar or their roadmap due to several reasons. “However, when someone approaches saying that they have ten thousand clients who need and are interested in your services, then you may just rethink your initial decisions. This kind of flexibility is at the core of what we do in Fintech and at PayPugs.”
Fintech helps the underbanked
Essentially Fintech provides a service that is more suitable for the underbanked because of the easy entry and relatively cheap fees. The process for them is much more seamless and easier to understand.
However, there is one weakness that is not directly caused by Fintech itself, but rather is an external factor – the poor and underbanked have relatively weak financial literacy.
“In the end, a person with a weak financial literacy has a powerful instrument at their hands, which can result in unsatisfactory results. So, that also is something to consider and rethink in the future”, concludes Zelinsky.