Thanks to technological innovation, a wide range of crowdfunding, marketplace/peer-to-peer (P2P) lending and other online alternative finance platforms have emerged in the last years, slowly changing the way individuals and businesses access and invest money. By broadening investor access to projects that would otherwise not receive attention from traditional sources, alternative finance can contribute to narrow the financing gap affecting Small and Medium Enterprises (SMEs) and entrepreneurs, especially those at the early stages of business development. Alternative Finance can also provide individuals new options for accessing finance and for making investments.
Digital currencies are digital representations of value that can be denominated in legal tender, such as e-money, or not, such as bitcoin. This section comprises the entire possible spectrum of digital currencies, from cryptocurrencies and virtual currencies that are issued by private developers and are denominated in their own unit of account, to national digital currencies that can be issued by Central Banks.
Originally introduced as an alternative approach to payments in the context of Bitcoin, Blockchain and related Distributed Ledger Technologies (DLT) are now viewed as a solution for a wider range of transactions in the financial sector. Many financial institutions have chosen to cooperate in order to approach Blockchain technology and its potential, forming different consortiums and initiatives that will bring along innovations and process efficiency at different layers, such as automated clearing and settlement, derivative trading, identifying and tracking assets. Moreover, Blockchain technologies also offer great potential for applications, such as smart contracts, distributed registries of property and identity,the Internet of things, among others.
During the last years there has been rapid growth in the number of technology-based firms entering the financial services industry (i.e. FinTech). These firms are mostly startups trying to compete with traditional financial services firms in many different areas, mostly in consumer banking and payment services. Despite their growth and the amounts of venture capital invested in them, the real impact of these firms on traditional financial services is still uncertain. The evolution can lead to a rather collaborative interplay among FinTech firms and traditional incumbent bank or it can dramatically change traditional business models. This section focuses on this evolution as well as new trends in the FinTech ecosystems.
Using broadband to deliver financially services through digitally-enabled channels has the potential to address fundamentally the cost factors preventing financial inclusion: On the client side, high transaction costs due to the difficulty of getting to the points of service and in meeting documentation requirements; and on the provider side, the lack of economies of scale and the difficulty of obtaining reliable information on unbaked clients. The falling costs of broadband access and smartphones make it possible to envision a rapid rise in take-up and usage of mobile broadband over the next few years, facilitating digitally-enabled channels and applications that allow for innovations at the product, model and process level.
Viewpoint February 2017
by Elena Yndurain*
How is this digital era transforming your life and the way we connect?
It may seem evident how digitalization is transforming the way we live and how we interact. It may also seem evident how this era is transforming the way we do business. But do we really know how digitalization occurs? Let me try to explain it through some examples.
The secret lies in the interlacing of different technologies that blur digital and physical boundaries.
Sensor technology captures reality from the objects in our environment. For example, yesterday I received a package, and UPS analyzes its fleet’s vehicle data to reduce fuel consumption and improve route efficiency . To transfer the data of those 80000 UPS vehicles requires 4G-network speed to send information and reroute as needed. To increase the speed, a 5G network would be ideal, since it would only take 1 millisecond .
For unmanned vehicles, this immediate information exchange is crucial. However, 5G will not be launched until 2018, and its penetration will be low, with only 550 million subscriptions expected by 2022 .
Data need to be exchanged AND used with purpose. This use is achieved through artificial intelligence algorithms, which turn data into patterns, predict behaviors, and make decisions. An example is an app to identify at-risk kidney patients, combining public and personal data to help doctors make diagnoses. This app is used in London’s National Health System .
Not only do intelligent algorithms analyze data, but they create more data along the way! As the amount of digital data created from people and smart objects increases, the size will reach 44 zettabytes in 2020 . This huge number is equivalent to the number of all the stars in the universe .
We also need to ensure that the data is shared securely. There is an upcoming technology, quantum encryption, that promises to protect our data. It was tested in the 2007 national elections in Switzerland to secure the connection from ballots to the Government’s voting repository .
We need to be prepared for this vast amount of data by developing ways to store and process it. The cloud has done a good job in parallel computing, but it will not be enough. We need a new computing paradigm, which Blockchain is introducing with its distributed network ecosystem and Dapps (decentralized Apps) model. The financial industry is already adopting it to speed up settlements .
Quantum point-to-point links will allow the secure transmission of highly sensitive data without any risk of interception by 2020 .
Here, we have a taste of what digitalization means and what it takes to make it happen. Many different innovations from the information, communication and technology fields are evolving and occurring simultaneously to enable digitalization, changing the world and human interaction along the way.
Digitalization is growing and transforming our lives and how we do things. We will need to forget some of our habits and beliefs about how things should work and learn new ways of interacting with our world through technology.
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