There is never a day in the world of Fintech and innovation that does not invite criticism and challenge.
History often repeats itself.
If we look back into the past, we’d realise that many of today’s inventions, from the telephone to the computer, have all met with some harsh criticism from at some point in time or another.
Whenever new innovations emerge that seem to threaten or disrupt the status quo, naysayers would undoubtedly be abound. The reason behind this, is that we often use the very lens and paradigm of the situation and issues today, and picture how these jarring new technologies and inventions can possibly fit into the current picture. Naturally, with such a frame of mind, many experts of the traditional world would criticise and point out the flaws and impossibilities of it.
And it’s the same for Fintech, Blockchain, and Crypto
Even as the sector has garnered a lot more acceptance and adoption amongst enterprise, retail, and investors, with Fintech start-ups raising a record high of US$39.6b in 2018 and global spending into blockchain is expected to account for US$2.9b this year, many high profile critics on the sector still remain.
It is well-known that Warren Buffett is highly critical of Bitcoin, calling it a “gambling device” and a “seashell or something” at Berkshire Hathaway’s most recent annual meeting in Nebraska. Renowned American economist Nouriel Roubini who teaches at New York University’s Stern School of Business also shares similar sentiments, and is famously quoted in a recent interview arguing that blockchain has “nothing to do with” the future of financial services, and that “the real evolution in financial services is fintech, but fintech has nothing to do with crypto”.
While each person is entitled to his or her views based on their experiences, perspectives and knowledge, it is worrying to pass quick judgements in a time when change is happening so quickly and when we have not first dipped our toes to experiment and explore the potential upsides of adopting these new technologies.
After all, there’s the JPM Coin
Despite Jamie Dimon’s widely known criticism about cryptocurrency in the past, calling bitcoin a “fraud” and “going nowhere”, JP Morgan also ironically became the first US bank to create their own cryptocurrency in February this year. Known as the JPM Coin, it serves as a digital coin to make instantaneous payments between different parties through blockchain. Prior to that, the bank has also been building Quorum, an Ethereum-based private blockchain built for enterprises, which powers the Interbank Information Network project.
Even widely perceived rigid central banks are also opening up to adopt and experiment with blockchain to truly understand whether the technology works for them. In a study done by World Economic Forum, more than 40 Central Banks are testing blockchain technology, with some even issuing their own digital currency, also known as Central Bank Digital Currency or CBDC. For instance, based on the study’s findings, Bank of France has replaced its centralised process for provisioning and sharing of SEPA (Single Euro Payments Area) Credit Identifiers with a decentralised blockchain-based solution on Ethereum since December 2017. Halfway across the world in developing Asia, the National Bank of Cambodia will also be one of the first few countries to deploy blockchain on a large scale for their national payments system for use by consumers and commercial banks. This will be done to support financial inclusion and improve the efficiency of the greater banking system.
And even beyond the realms of traditional finance, corporates have also been moving into the fintech and blockchain space, increasingly blurring the lines between industries as they seek to gain an edge in a competitive arena today where it is the end-consumer’s experience with and perception of the brand that eventually moves the needle.
By the same token, cutting through the buzz surrounding Facebook’s recently announced cryptocurrency GlobalCoin, the tech giant’s foray into the digital currency space can also be seen as an effort to improve the overall user experience by complementing their existing products with payment features.
Experimentation is key
While there are still many hurdles to be overcome, innovation often happens at the periphery and not the mainstream. The disruptors and future winners will continue to test and wade deeper into the technology, instead of nipping them in the bud, even if outcomes may remain uncertain at this point in time.
As Francois Blanc, Santander UK Head of Customer and Innovation said on a panel discussing corporate investments and partnerships with startups at the Global WealthTech Summit in November last year, “We can talk a lot about mindset or strategy, but unless you start to experiment with the partnership, what it works, if that works and how it works. The more you can practice, the better. And there’s ways to practice in very safe environments as well, with sandboxes or very limited customers.”
This spirit of experimentation goes well beyond partnerships between fintech startups and banks. As lines blur, an attitude towards experimentation is key across industries when dealing with these new technologies, so we can continue to explore and harness the possibilities they could bring, while also better understanding its various limitations.
Because the tides can turn
The Oracle of Ohama can sometimes get it wrong in his predictions.
He totally gave up on experimenting when he could not previously grasp and appreciate new technologies, missing out early opportunities to invest in the Google and Amazon stocks. And despite his personal reservations about tech and crypto, the need to find a new niche for investments still drove Berkshire Hathaway to invest in fintech anyway.
At least history didn’t repeat itself in this case.