The new world of finance taking shape in the 2020s is driven by several factors, including the move towards a cashless society accelerated by the pandemic; the continual evolution of digital financial assets such as cryptocurrencies; and the readiness of central banks to embrace them. Furthermore, the current challenging economic landscape as millennials enter the workforce is also reshaping demand for accessible financial services.</em></p> Demystifying fintech</strong></p> Deutsche Bank’s Macro Strategist Marion Laboure (speaking on 13 September at the session ‘Should global trade finance go decentralised?’) has regularly charted this progress in a series of white papers, The Future of Payments</em>, published by its research arm since she joined the Bank in 2019. Together with consultant Nicolas Deffrennes she is the author of ‘Democratising Finance: The</em> Radical Promise of Fintech’</em>,¹ which Deutsche Bank CEO Christian Sewing says “demystifies fintech and explains its role in democratising finance”.²</p> Laboure and Deffrennes provide a comprehensive overview that begins with the earliest innovations in financial services and outlines how the financial technology revolution, which they suggest is still in its infancy, is beginning to reshape societies and economies. Modern fintech is democratising finance and while digital currencies and robo-advising have attracted attention in the popular media, little has been written about how fintech is affecting the overall economic outlook of nations. </p> Fintech innovations from mobile banking via smartphones, digital investing services and the suite of cryptocurrencies developed since bitcoin’s 2009 debut share one common goal – making financial services more accessible to the public. This revolution enables consumers to transfer funds, raise money for business start-ups and manage personal finances without the help of an intermediary or professional” while meeting goals such as greater financial inclusion.</p> New players and 4IR</strong></p> Following the 2007–2008 financial crisis, advanced economies have been constrained by monetary policy, strained finances, and low productivity growth. While the current macroeconomic landscape of difficult to access credit, low savings levels and high housing prices is a perfect storm weighing most heavily on millennials. </p> “Nobody has a crystal ball, but we can assume that today’s extreme circumstances will catalyse change,” reflect the authors. Fintech will enable financial services to meet the needs of those who will struggle to save for property purchases and pensions. With much of the transacting done with a mobile phone, this will include improving access to credit, channelling small savings into the formal economy, reducing product and service costs, and reducing transaction costs. </p> With the fourth industrial revolution (4IR) now underway, the rise of transformational companies such as Google, Amazon and Apple and the forces driving the digital revolution, such as artificial intelligence is scrutinised. The authors discuss the need for governments to modernise their fiscal policies, how fintech is assisting the still significant unbanked population in emerging markets, digital currencies and how central bank digital currencies (CBDCs) have been transformed. </p> Addressing the underbanked</strong></p> “As for the billions of underbanked people trapped in poverty, fintech innovation is providing improvements in healthcare, government infrastructure, farming and manufacturing. These advancements often give poor people an opportunity to launch their own businesses,” explain Laboure and Deffrennes. </p> This is because fintech can help small-scale entrepreneurs in their struggle to escape poverty by providing them with basic banking services through which to grow businesses and store wealth, all of which enable them to better weather economic shocks and health setbacks. The scope of fintech improvements is enormous because there are so many unbanked people in the world with women disproportionately excluded from the formal financial system. Women account for 56% of all unbanked adults.</p> An opportunity indeed.</p> ¹ Democratising Finance: The Radical Promise of Fintech</strong> by Marion Laboure and Nicolas Deffrennes (Harvard University Press, pp266)</p> ² See also Marion Laboure’s flow</em> article, Democratising finance</a>, that provides further information.</p> </p>