The emergence of startup hubs and FinTech trends like digital currencies and distributed ledger technology are changing the balance of the world’s finance hubs towards more democratic finance services that represent everyone – and that’s a good thing
We are witnessing the shift in the geopolitical environment and how machines can change institutional structures. At the same time, we see a lot of development on a local level that is partly linked to the global development yet partly independent. For example, we see new emerging startup hubs, while FinTech and political decisions like Brexit are changing the balance of the world’s finance hubs.
Startup companies are seen as a driver of economic growth in the midst of these paradigm shifts. Nearly every country wants to have more innovative companies, and Silicon Valley in the US is seen as an example of how companies worth billions can emerge from seemingly nothing. Silicon Valley is still considered to have the most dynamic startup ecosystem, but we’re already seeing examples of some dramatic successes emerge from outside the valley.
In China, for instance, companies such as Alibaba, Huawei, Xiaomi and WeChat have emerged in recent years and can be considered enormous successes. For example, Alibaba’s payment arm Alipay processes over 100,000 transactions a second during a busy peak, while Visa typically processes under 10,000 transactions a second. Alipay will process 10 times more transactions a second from a handheld than a traditional leading credit card company.
A key paradigm shift here is how we’re already moving beyond the decentralization model. Bitcoin and blockchain have been important buzz words in FinTech for a couple of years – more generally, we talk about digital currencies and distributed ledger technology. Some people say distributed ledger technology (of which blockchain is just one model) will do for finance what TCP/IP did for the Internet – it could change the whole finance world, just as the Internet has changed many businesses and operations since the 1990s. When this starts to happen, we’re no longer looking at decentralizedfinance services, but distributed financial services that enable real p2p, bypassing some parties (like banks) to authorize and control monetary transactions.
With Asia emerging as a leading economy in the world, several countries and cities in Asia are building their future positions. For example, Singapore and Hong Kong must be active in FinTech to guarantee their positions in global finance in the future. Other counties like Vietnam and Malaysia are doing very active and systematic work to develop their own startup and entrepreneurship ecosystems. It is no longer about trying to emulate Silicon Valley, but developing a comprehensive digital ecosystem with services to facilitate and develop startup services, funding and support for growth companies.
We see financial services playing a fundamental role in enabling this development, but they can also help bring benefits to all people. Currently, banks and other finance institutions are seen as representing an arrogant establishment that exists to make the rich richer. More democratic finance services should represent everyone, enable operation of business and their capitalization from anywhere in the world, while also enabling fairer systems for tax collection and wealth distribution.
Emerging economies, intelligent machines, and the rise of the middle class in emerging markets are shaping the global economy, as well as all local economies. This has also influenced most companies in the world in terms of how they develop future offerings, make their products and reach their target audiences. It is a challenge for politicians to manage this development in a peaceful way, but an important part of the solution must be the promotion of changes that bring benefits to all parties, not only a few. At the same time, the solution is not to stop development, but drive development and wealth distribution.
This article is based on the Grow VC Group Research Report, “Machines, Asia And Fintech – Rise of Globalization and Protectionism as a Consequence.” The article was first published on Disruptive.Asia. The report is available here.