Fintech has made quite a lot of headlines, at least in startup publications this decade. But we can still say that actual changes in the finance industry have been quite insignificant and even the new technology, or fintech, has only played a small role – so far. Most changes have happened on the outer peripheries rather than the core. When and how should we expect the big changes to happen?

A new research report Fintech 50 lists the top 50 fintech companies and fintech growth during the last five years. We can see there are some success stories, but if we look at those numbers and companies, we can conclude, fintech hasn’t yet been a threat to traditional finance institutions. Square and Stripe are the top companies on the list, they exist mainly to handle payments. They represent new technology and make payment solutions more cost effective. They are also services for processing transactions rather than actual finance services.

Other companies on the list include also new credit scoring, trading and money transfer services. They are also very transaction-oriented. We still have quite limited changes, e.g. in saving accounts, wealth management, real estate finance, lending and investing services. Robo-advisors is a category that has seen much more talk than real business.

We have heard many reasons why it is so hard to change the finance sector, from regulation to a need for a strong balance sheet, risks and conservative customers who guard their money. But as we know, in many industries big disruption often takes more time than visionary early-adopters expect, but it then comes and maybe in a bigger way than expected. We have seen, how long it has taken the big disruption in retail to really happen.

If we try to think what has been successful in fintech and new finance services, it has been services that are very simple and straightforward to ordinary people. Services to make payments easy, services to transfer money or get small loans when you need them. We can never underestimate, how important convenience is to consumers. It is more important than price, which is also very important.

We have also seen that some new exciting things get traction, but it can be for a short time only. If the value, usability and comprehensibility are not in place, people abandon the services quickly. We have seen equity crowdfunding, ICOs, robo-advisors and P2P lending getting a lot of attention, but the services haven’t been able to offer enough value or they have been too complex to understand or use. There are many reasons for this such as being too complex to understand the real value; difficult to evaluate the services themselves; even bad services and complex finance products or asset classes.

One very significant problem with new finance services is when too many compromises are made, when the services haven’t been disruptive enough. Some finance professionals can challenge this argument, and say you can make new finance services, only if you know the old services well enough and build new products based on that knowledge and experience. But if you do in that way, you just add new stickers on old services, or maybe add some web and mobile functions, but you don’t go to change the fundamentals of the services. The successful online retailers or media services haven’t only added a web services to order items or watch content, but they have build the whole company and operation on moderns digital operations, logistics and models.

If we simplify this real disruption point, we should not expect real new disruptive finance services from London, New York or Singapore, but from San Francisco, Berlin and Shenzhen. They are not built by former bankers, but by software-oriented risk-taking entrepreneurs that are ready to challenge old models, take risks and convince risk taking venture capitalists. 

Many technology solutions in fintech have been based on traditional fundamentals, like centralized solutions that also utilize many old finance world concepts and systems. Although blockchain has suffered from the ICO bubble, it is a model and technology that can offer tools to really change the finance world. Blockchain and distributed ledger solutions generally are also developing behind the scene rapidly. It will be to find the balance between totally wild distributed models and how fast the regulation can develop.

What can we expect in fintech during the next few years? Here are some predictions:

1. Most real disruptive services that produce game changers will come from outside the finance services and former finance industry people;
2. Successful new finance services will not only offer a web or mobile cover to old types of services, but they will also be services and instruments that are fully designed to digital elements and operations;
3. The successful services will be easy to understand and easy to use;
4. Software for new services will be built on the latest models and principles, including open source components, GitHub libraries and open APIs;
5. The services will be very scalable, and should not be compromises of old traditional manual processes, new technology or limited to geographical areas.

We will see much more change in the finance sector, but the timing is always hard to predict and in the finance sector it is even more complex with regulatory constraints. But when we get services that offer significant value to people and attract enough investor money, no regulator or politician will be able to stop them for long. It might sound like a cliché, but we need finance services that really disrupt the industry and not simply cutting corners.

The article was first published on Disruptive.Asia.

Read more about technology solutions for fintech services at Difitek.

Fake news has been a popular topic for a few years, especially how it impacts politics and elections. Fake videos are becoming more relevant too, especially when technology enables the creation of videos where faces and voices can be seamlessly implanted. The most recent Mark Zuckerberg fake video was a reminder that this is really happening. 

However, a potentially more dangerous threat comes from fake data in all formats and why it is also a bigger personal risk than data leakages. 

The idea of fake news, videos or data more generally is to have something that people believe to be authentic or valid, even though it is not. The fake material is then used to change people’s opinion, sway decisions or cast a slur on someone. They are used frequently in politics but can also be used in business, for example, to cause trouble for a company, manipulate stock prices or create support for competitive businesses or companies.

At both business and personal levels, stolen data and misuse of confidential data have been the main issues, e.g. someone uses a company’s business secrets, steals an identity, or reveals personally sensitive information. As we know, this can cause all kind of business and personal issues, but it is not always the worst option – what if data was fake?

Someone can create fake rumors about a person, or a company and they are a kind of fake news. Fake rumors are probably a very old model to cause harm to someone and it is very hard to fight against them, if they are good stories. How about going deeper into your data. What if someone could create a new credit history for you, new family details, a criminal record or health records. Basically, many parties have a lot of data about us and it has a lot of impact on our lives, but if that data was modified, it could really cause trouble.

Let’s imagine a storyline for a thriller where a person’s entire historical information is changed. He doesn’t work in his workplace anymore, he doesn’t live in his house, he isn’t married to his partner, isn’t the parent of his children, doesn’t have access to his bank account and isn’t the person in his passport. Basically, the person would longer be the person in his or her life. The scary part is that this is no longer a fictional plot for a TV series – it could actually happen to someone.

You might say this fake data was easier to create before the digital era with paper documents. While it may be true, with digital information the impact of fake data can be much greater, and it can be generated at a much larger scale. The fake data can be distributed to many places quickly. There are already examples, how a simple error in one master system changed the name of a person, the new name is distributed to all relevant places, including the passport office, health care service and banks. Suddenly the person cannot use any services with his real name and his ID is no longer valid. If your fingerprints and face don’t match the government’s passport and ID database, which is considered to be the real one?

Fighting against fake data needs other means than just protection of data from leaks and theft. We can say there should be enough safe places where the information is hard enough to change. There should also be models on how to handle information that seems to be incorrect. In practice, this requires complex models, with no system totally safe it is hard to know what information is really correct, or if some information has been modified. 

This requires planning on how to handle this risk. Some organizations and people might still say it is enough to have safe authority, bank and health care organization databases that have the master copies of the data, but this is naïve thinking. We have seen enough cases that prove no system is totally safe. 

An important aspect is also the legal protection of individuals. If your digital data is only stored and managed by the government, banks, health care organizations and big companies, how can you prove that your data is correct or even know if it is correct in those systems. Individuals should be able to protect against criminals but also against government, authorities and big businesses. But how do you do it if they manage all your data?

We are starting to see possible solutions to prevent this threat. For example, solutions to control personal data, blockchain type solutions to track all transactions and history of changes and models to check data from reliable sources and verify its integrity. But we are still in the very early stages. The first step is really to recognize the risk and include it in the design and regulation of data systems. Data already plays a central role to drive our daily life. We must be able to guarantee that our data is correct, and that it is me who defines my data and not that the data makes me someone else.

The article first appeared at Disruptive.Asia.

Read more about new data models and virtual assistant at Prifina.

Data has been referred as the oil, blood vessel or cornerstone of business nowadays. But it is a very unequally distributed asset. Some giants, like Facebook, Google and Amazon, have much more than others. Once upon a time the Rockefeller oil company was split under the antirust act. Should the regulators do the same to data giants, or can the market handle them?

​We have many big companies around the world, like telco carriers, retail chains, TV and publishing companies and banks. They have millions of customers in their home and foreign markets. What do they all have in common? They want to utilize customer data in their operations. But suddenly they have found themselves in a situation, where they cannot compete in data with the Internet giants.

Even the biggest publishing companies do not have better or even enough data to compete with Facebook to target advertising. Retail chains cannot compete in data with Amazon. There are also rumors that if these companies were to launch finance services, banks would have a tough time to compete with them. Telcos basically were the source of data, but nowadays Google and Facebook know their customers better.

This situation has especially led the EU to investigate these companies and how they utilize their strong positions in the market. There are, at least, speculations, how Facebook, Google (Alphabet) and Amazon could be split. Amazon’s position, in particular, has created political pressure in the US, when many retailers are in big trouble.

Although we often hear speculation about antitrust laws especially in the US and the EU, it is not so typical to split companies. It is often also said that technology and markets are changing so rapidly today that it is not necessary to split companies anymore. The market will take care of them. A typical example in this context is Microsoft. In the late 1990’s it dominated the PC operating system and software markets. But mobile, Internet and cloud services have changed the market and no one sees Microsoft as dominating the market anymore.

If we think data, is it realistic to think, the market could handle this. There are companies that are data aggregators, collect data from many sources and sell it. In that way companies can buy more data. But probably this is not enough to compete with those that are really in touch (or in the mobiles) of each individual. And privacy requirements have even more impact on data trading than on collecting it.

So, could anyone have more data on you than Facebook, Google or Amazon? There is one party that has even more of your data. But the question is, if this party can really operate on the data market and change the market and competition situation. Or if this party technically can really make it easy to control and use the data?

Who is this party that knows more about you and collects more of your data? Government, bank or your local Internet provider? No, it is you, yourself. You can still know more about yourself than any Internet company and also collect more of your own data. But you would need better tools to do it and to really control your data.

If you can carry your data or purchasing profile to your supermarket, or use your profile to select the best offers for you or to have your financial profile to find loans and wealth management products for you, it would be impossible for Google, Facebook or Amazon to compete with your data. It would be a real disruption for the data market.

Data defines your life and what you can get nowadays. It is a threat that a few gigantic companies in the world control your data. It doesn’t stop with these companies, if governments start to collect all these data points and force companies to hand them over, it can mean many new risks. Data doesn’t only impact your human rights, but it starts to be your human right. 

If the solution for data control is not to split some companies and hope to have governments that respect human rights, but to enable people to own and control their own data. Then it would change the whole data business, how centralized Internet has worked and how people can control their own data. The good news is that distributed data models, blockchain and the changing urgency and discussion about privacy are going to enable this soon.

Once the Internet was expected to make the world more open and equal. It has happened in some areas, but data and some services has become very centralized. Now we see signs, that we can go to more distributed models, where human beings can control their own roles and even get a personal AI to help them.

The article first appeared at Disruptive.Asia.

Read more about personal data and virtual assistant at Prifina.