COVID-19 is completely transforming the way people live, work, and interact with one another. As more and more day-to-day activities take place online, demand for digital finance and other forms of financial technology services has increased simultaneously.
The new normal created by the pandemic brings huge opportunities for the industry. Fintech will have to focus on a few important priorities in 2021 as we work toward serving more users and gaining widespread acceptance.
Foremost among these is how technology can be used to enhance mutual trust and deepen cooperation among multiple parties globally, strengthen efforts at financial inclusion to heal economic divisions worsened by the pandemic, and take a more active role in shaping the green behavior of individuals and businesses to address the urgent issue of climate change. (As a company deeply involved in fintech innovations, Ant Group would benefit from some of the approaches highlighted in this piece.)
During the past years, we have already seen how technologies were integrated into the fintech industry, with artificial intelligence and cloud computing widely used in financial risk control and management, helping create a more efficient and stable operating environment.
As more companies digitalize their operations to mitigate the impact of a more socially distanced post-pandemic world, strengthening mutual trust among multiple parties and facilitating the secure flow of information has become a critical business need.
Blockchain, with its tamperproof and distributed nature, is key to strengthening trust in this increasingly digital environment. This trend is evidenced by ever-growing investment in blockchain solutions, with worldwide spending expected to grow to $15.9 billion in 2023, 10 times the $1.5 billion invested in 2018.
The spending boost will fuel continued advancements in blockchain and privacy-preserving data computation technology, leading to fintech innovations that will make digital partnerships among multiple parties—such as banks, institutions, and fintech companies—a more common sight around the world.
At Ant Group, for example, one of our key innovations in building this trust-enhancing technology is Trusple, an international trade and financial service platform powered by our AntChain blockchain-based technology.
Launched in September 2020, Trusple works by generating a smart contract once a buyer and a seller upload a trading order on the platform. This automated process not only mitigates the intensive and time-consuming processes that banks traditionally conduct to track and verify trading orders, but also ensures information is tamperproof.
Both factors previously prevented banks from providing affordable financing to international traders. Through this innovation, we hope to significantly increase the level of trust among all parties involved in trade, making it easier for traders to obtain much-needed financing from lenders at a lower cost.
As a result of the pandemic, digital solutions that were expected to take years to be adopted on a mass scale have suddenly become the norm. This has occurred even in countries that have a majority of the population living in rural areas, as more people embrace the digital approach to fulfill their banking needs due to strict social distancing measures.
Fintech is bridging the gap between lenders and borrowers, and even reaching people who do not own a bank account, with unprecedented speed.
For instance, only 50% of adults living in rural areas in Bangladesh had a bank account in 2017, according to the World Bank’s Global Financial Inclusion Index. To cover this deficiency and help people maintain social distancing, mobile financial services provider bKash has enabled its customers to send money to mobile phone users who do not have an account amid the pandemic. Furthermore, bKash has cooperated with the Bangladeshi government to send cash grants digitally to millions of affected individuals, including 400,000 livestock farmers hurt by the pandemic. (Ant Group invested in bKash in 2018.)
In 2021, we also expect to see more integration between digital finance and the real economy, which will help more customers get access to financial services and bring more benefits to small and medium enterprises and consumers.
As the global digital economy continues to grow, more banks and financial institutions will be encouraged to shift their offerings from offline to online to meet the accelerated shift in consumer behavior to digital. In December, for example, the Monetary Authority of Singapore granted four digital full bank licenses for the first time in the city-state, meaning that nonbanks will be allowed to provide banking services. Such digital banks, which have lower operational costs, are poised to become more popular around the world.
Green finance (also known as climate finance) has gained increasing attention around the world as an important way of meeting the needs of environmentalism and capitalism simultaneously. We believe fintech can also be a driver in pushing for green innovations to help address climate change.
According to a joint study by the Paulson Institute and Tsinghua University, China has been at the forefront of testing fintech-driven green finance innovation, sustainable development initiatives, and low-carbon behavioral transition.
With their growing adoption around the world, digital finance platforms can also play a more active role in encouraging consumers to be more environmentally friendly. One example is the Ant Forest project, launched on the Alipay mobile app, which rewards its users with “green energy points” each time they take a step to reduce their emissions, such as by biking to work, going paperless, and buying sustainable products. These points grow into a virtual tree on the user’s app, which Alipay matches by planting a real tree or protecting a conservation area in partnership with local NGOs.
From building trust with blockchain to promoting inclusion with digital finance, adoption of fintech around the world will dramatically change the ways in which financial services interact with consumers.
Xingjun Ni is CTO of Ant Group.
