I don’t really understand blockchain. I have a working knowledge of what it is and and does, but if I have to explain it to someone else, I am soon lost among the merkle trees. Since we’re hearing more and more about it, along with many other financial technologies, I could do with a proper introduction. Hence Fintech Revolution: Universal inclusion in the new financial ecosystem, by Sofie Blakstad and Robert Allen, a book I have been waiting for.
Blakstad and Allen are perfect guides. They’ve worked in a string of major banks and advised on digital banking at the highest level. They’re also practitioners, currently CEO and chief strategist at Hiveonline, the Copenhagen-based small business platform. They invite the reader to treat the book as “a how-to guide to building a bank, or as a guide to the evolution of alternative finance, or as a commentary on global socio-economic change driven by technology.”
Their particular interest is inclusion – how new services are reaching those who have previously been outside of the banking system. That’s 40% of adults around the world, many of them working and doing what they can, but with no bank account or access to finance. To mainstream banks these customers haven’t been worth the risk, but that’s left a niche that new tech companies can fill with specific services. Perhaps the most famous is M-Pesa in Kenya, the mobile phone based payments system. Then there’s accounting software like Quickbooks, which has reduced costs for small companies. There are blockchain systems that can support sustainability outcomes, including SolarCoin, which I generate myself on my roof. There are challenger banks, peer-to-peer loans, crowdfunding, and alternative currencies such as Bitcoin and Ethereum.
The last of these have been hijacked by speculators, but that hype is a short-term distraction from the deeper revolution going on behind financial technologies. Around the world, people are leap-frogging traditional banking to benefit from leaner, more equitable finance. Like renewable energy, it is more democratic, decentralised and in many cases resistant to state control or elite capture. The whole sector could receive a major boost if the next financial crisis causes a flight into digital alternatives, and eventually fintech could even prove an existential threat to high street banks.
The authors have structured the book with a series of chapters on the underlying trends, and then chapters on new responses. This is useful, as the reader gets a sense of the technologies emerging in context, seeing how the failures and gaps in the traditional banking sector have created new opportunities. I’d have liked a few more detailed case studies, and perhaps some background explainers on key technologies. The book dips into business-speak from time to time and can occasionally be technical, but the authors say at the outset that it’s a book to pick and choose from. So, yes to chapters on ‘leapfrogging banks in emerging markets’ and ‘green fintech’ for me, and no thanks to ‘case managed and core standardised capabilities’, whatever those are.
A book like this will inevitably capture a moment in time in a fast-moving field, so if you’re going to read it, make it soon. I certainly found it helpful, even if I still don’t really understand blockchain.