E Finance Trends

Introduction
Fintech refers to financial technology. A fintech company is any business that uses technology
to modify, expand, or automate financial services for clients.

Financial technology Fintech makes financial transactions for individuals and businesses less
(FinTech) is rapidly complicated, increasing their accessibility and affordability without the use of a
transforming the financial middleman.
sector. Numerous
changes-many of which were
unimaginable even a decade
ago-are occurring at an
Fintech has had a significant influence since it has created innovations that
unprecedented rate in nearly promise to make it simple and accessible to obtain financial services (Shah, et
every element of the world's al.,, 2022).
financial industry because to
digital technology (Huaa & In other words, FinTech refers to financial services for markets & institutions
Huang, 2020).
that are facilitated by technology.

The FinTech industry is the fusion of financial services and technological applications that
adds value to society by cutting costs and time commitments while maximizing potential
(Mostafa, 2021).

lasted from 1866 to 1987, was the first period of
financial globalization supported by technology
infrastructure like transatlantic transmission wires.
This was followed by FinTech 2.0, which took place
between 1987 and 2008 and saw financial services
organizations gradually digitize their operations.
Since 2008, the FinTech industry has undergone
significant change in both developed and
developing nations (Mostafa, 2021).
Most successful Fintech ideas exhibit the LASIC
principle (or low profit margin, asset light, scalable,
innovative and compliance).
Mobile payment technology, including the banking
system, has proven to be most
The increase in Fintech businesses and investment
is seen as a response to the 2008
global financial crisis (GFC), which led to a decline
in confidence in the banking system.
successful in nations with brittle institutional
structures and efficiently transfers capital. It has
expanded financial inclusion, lowered cross-border
fund-transfer costs, and added millions of new
consumers in India, China, and Africa.
History
Following the GFC, more stringent regulations, low
interest rates, a surplus of global capital flows
pursuing yield, shifting consumer expectations, the
widespread use of smartphones, and less
expensive data processing are all factors that have
contributed to the emergence of fintech. A cost-
effective infrastructure has been developed to
support Fintech innovation as a result of the rising
use of blockchain, artificial intelligence, cloud
computing, and big data.
Due to the rapid innovation and disruption of the
global financial system brought about by fintech,
new business models, business earnings, and
investment opportunities have emerged.
Cryptocurrencies, blockchain, peer-to-peer (P2P)
lending, artificial intelligence platforms, Insurtech,
crowd funding, and mobile payment systems are
just a few examples of the various Fintech
categories (Arslan et al., 2021).
 Definition

The term "fintech" is a combination of the terms

financial and technology. It's a catch-all
term for any technology or software advancement in the
market for financial services and goods
 Tech Finance Types
•Mobile Banking •Digital payments •Blockchain
With the use of an app, customers of banks A distributed digital ledger that can
and other financial institutions can under take record transactions across multiple
a variety of transactions through mobile A digital payment is when funds are computers and is unchangeable is referred
banking. transmitted from one account to to as a "blockchain" in this context.
another via a digital device, such as a
Customers can access and manage their It is kept in the form of blocks that are
smartphone. A type of digital
accounts through the app from anywhere.
payment system is the Unified connected to one another in a chain.
Payments. Blockchain is a platform for decentralized
With mobile banking, you may create a new
account, check your balance, transfer money, digital assets that can be accessed online.
and pay invoices. Consumers are increasingly
looking for easy digital access to their bank
Interface (UPI). This definition Blockchain transactions usually involve
accounts, especially on mobile devices.
covers payments made with credit, the digital currency bitcoin, whose use is
An American study from November 2016 debit, and prepaid cards as well as growing in popularity as more individuals
found that 72% of those who utilize financial bank transfers, mobile money, and use fintech (Shah et al., 2022).
services do so by opening checking accounts other payment methods (Shah et al.,
online (Shah et al., 2022).
2022).

•Insurtech
The application of financial
technology to the insurance
sector is known as insurtech.
Nowadays, it is possible to
obtain insurance without ever
leaving the house because many
insurance companies are
embracing technology. Online
claims can also be made by
individuals (Shah et al., 2022).
Tech Finance Types Cont.2
•Crowd Funding
The financial industry of crowdfunding is
expanding quickly.
Crowdfunding is a way to raise money by
enlisting the support of close friends,
family, customers, and individual
investors.
Through the use of social media and
crowd-funding websites, a significant
number of people are recruited for this
strategy.
Crowd funding has been progressively
increasing as a result of the development
of fintech (Shah et al., 2022).
•Peer-to-Peer Lending
Peer-to-peer lending occurs when
regular people help others in need
without the use of a financial institution
acting as a middleman. Potential
borrowers and lenders are connected
through a peer-to-peer (p2p) platform.
The method makes getting credit easy,
quick, and convenient.
P2P lending enables customers to
purchase something now and pay for it
later, even in small instalments. This
business model has become more and
more common (Shah, et al., 2022).

•Personal
Finance
Management
Fintech developments
have made personal
financial management
simple for everyone.
Consumers may
successfully manage their
funds and obtain insight
into their spending habits.
Tech Finance Types Cont.3
•Cryptocurrencies •Robo -advisors
Companies offering financial services are increasingly entering
Software programs that use
new markets. On the other hand, there is mounting evidence that
these crypto currencies undermine users, financial markets,
algorithms to help people
economic activity, and the global financial system (Mostafa, make wise
2021). financial decisions.
Unlike traditional currencies, which are frequently backed by Robo-advisors are
gold and silver, cryptocurrency is built on distributed computing. becoming more and more
Distributed computer networks are "mining" cryptocurrency, as
popular in the financial
opposed to central banks, which produce traditional currencies.
industry, particularly in
These forms of money govern medium exchange ,the generation portfolio management and
of new units of a certain crypto currency and utilize cryptography stock markets where they
to protect and verify transactions. simplify, make trading more
Cryptocurrencies are essentially restricted records in a database accessible, and allow
that nobody can transfer until certain requirements are satisfied trading on the go
(Mostafa, 2021).
 Explanation of the Concept of “FinTech”
• Fintech refers to innovative financial services offered through technology, focusing on
digitization, decentralization, and disintermediation of economic transactions.
• It is powered by information technologies like peer-to-peer networking, big data analytics,
machine learning, blockchain technology, and open APIs. FinTech has improved company
processes by lowering costs and fostering efficiency, innovation, and speed.
• It has also incorporated advancements in retail banking, crypto currency, investments, financial
literacy, and education.
• As services are automated, business models have changed to offer personalized services
without geographical or time zone restrictions.
• FinTech has provided online platforms for trading, lending, and asset management, and has
helped in disintermediation.
• The banking sector benefits from FinTech's lower cost of intermediation and increased financial
inclusion. The demand for smartphones in both developed and developing economies continues
to impact mobile banking services, with new fintech companies enabling mobile payments,
Quick Response (QR), and SMS technology.
 FinTech stakeholders and Ecosystem
• The FinTech ecosystem is a complex network of relationships between FinTech firms,
regulators, investors, the government, and creative institutions. It includes banks,
credit grantors, insurance companies, and exchanges. FinTech offers customers
automated platforms for managing their assets using Robo-advisors and algorithms.
Bankers are particularly interested in fintech as they may view strategic partnerships
as a potential path.

• Consumer interest in fintech services is rising due to fewer rules than traditional
banking. FinTech's rise has aided companies in lowering costs and increasing
profitability, drawing media attention and investors. FinTech has also provided
underprivileged communities with alternative options, such as FinTech shadow banks,
which offer loans without the need for a bank account.

• Philanthropic investors are also interested in fintechs as it makes charitable work easy
and low-cost. FinTech has impacted the broader public, not just consumers or SMEs,
as it is quick, effective, and has cheap transaction costs. However, FinTech has been
linked to criminal activities using bitcoins, with 46% of bitcoin transactions connected
to illegal activity. To limit these actions, stringent oversight and controls are necessary.
 Impact of FinTech
• The fintech revolution has significantly impacted traditional financial institutions
worldwide, transforming the financial landscape through digital banking, peer-to-peer
lending, and digital payments.
• Mobile phones have enabled swift and easy online payments, reducing transaction costs
and fraud risks.
• Blockchain technology has also opened up new opportunities in the finance industry.
• Traditional financial institutions have traditionally offered deposits and credit facilities,
but fintech has made significant strides in financial inclusion.
• Banking has become a hassle-free operation, transitioning from branch-specific processes
to digital platforms like the internet, social media, and smartphones. Fintech companies
have simplified traditional remittances, streamlining and simplifying internal and external
activities.
• This has led to the adoption of multichannel banking, digital banks like neo banks, and the
growth of e-wallets like PayPal and Apple Pay.
• Many financial institutions now recognize e-wallets as a cooperative action to accept
technology improvements.
• Fintech has also been a turning point for entrepreneurs and small business owners,
enabling them to process payments and obtain loans, particularly in small enterprises,
which were once considered high-risk.
 FinTech Opportunities in Africa

• Africa is an extremely fertile environment that is ready for the

adoption of FinTech solutions, with its high percentage of unbanked
individuals and its high level of mobile phone penetration.
• To keep up with and match the cutting-edge solutions provided by
FinTech companies.
• The rise of FinTech in Africa is also putting pressure on the
continent's traditional banking and financial services organizations to
adopt FinTech solutions as well.
• Banks and other financial institutions are actively looking to buy,
invest in, or work with FinTech businesses.
 FinTech/Financial Inclusion Challenges/Obstacles

• Economic problems in developing countries . Include corruption, political

unrest, lax intellectual property protections, and a lack of trained labor.

• Agriculture is a major driver of economic activity in Least Developed

Countries (LDCs), but climate change is affecting agriculture.

• Africa faces challenges with weak governance, leading to disparities in access

to government services and investment prospects.

• Infrastructure needs upgrading, and Public-Private Partnerships (PPPs) must

be widely adopted to improve Africa's infrastructure.

• Women face challenges with limited access to technology, social customs,

and financial services. Financial service companies are less motivated to sell
to women, and they struggle to connect with them through traditional
marketing channels.
 Egypt’s FinTech Landscape
• Egypt is regarded as the third-biggest country in Africa and the largest country in the Middle East
and (MENA) area in terms of population.
 Egyptian Start Up Market.
A-Evolution of
FinTech- B-Business C-Breakdown
D- Prevalence of types of E- Customers served F. Startups' reach
enabled Stage of of Startups by different geographic
Startups over FinTechs’ business models: by FinTech
Startups: sub-sectors areas
years

The Egyptian Egyptian offer diverse services

Around 70% of Around 9 million
FinTech market and business models, with 48
Egypt's FinTech- Egyptians are served by
is dominated by B2B models, including
Egypt ranks enabled startups FinTech and FinTech-
Payments & marketplaces, regulatory
among the top have released enabled startups, with Twenty-three startups of
Remittance, technology, data analytics,
four active their products, followed by
28% of customers being Egypt's 112 startups
artificial intelligence, female. Out of 112 operate directly in
African nations while 30% are in Lending &
in the fintech accounting, and expense startups, only 112% governorates other than
the pipeline, Alternative
sector, with management. With Egypt's have a customer base of Cairo, with a greater focus
including those Finance with 15
112 fintech and large MSMEs, the B2B FinTech at least 50% female. To on Lower Egypt's
working on MVPs startups (13%).
fintech-enabled Emerging industry offers opportunities in better understand (Dakheila, Monofia,
and prototypes. female financial needs, Sharkia, Giza, and
firms launched subsectors like payments, microlending, cash
by 2021, fueled This indicates a startups must focus on Ismailia), Upper Egypt's
Blockchain, management, insurance, and
by rapid need for sex-disaggregated data, (Minya, Qalyobia), and
Chatbots, Digital supply chain. The remaining
expansion over additional as 64% of global then Urban Governorates
Investment startups fall into B2C models
the past seven funding and Platforms, and
FinTechs have found (Alexandria),
(33 startups), including ROSCA female clients have
years. investments for Digital Banking and Wealth Management & higher utilization rates
the sector's require Egyptian Savings, and B2B2C models (31 than men.
development. talent. startups).
 E- Finance Egyptian presence :

GEOGRAPHICAL REPRESENTATION AMONG

EGYPTIAN GOVERNORATES : Global Presence :
 FinTech/Financial Inclusion Challenges/Obstacles

• Economic problems in developing countries . Include corruption, political

unrest, lax intellectual property protections, and a lack of trained labor.

• Agriculture is a major driver of economic activity in Least Developed

Countries (LDCs), but climate change is affecting agriculture.

• Africa faces challenges with weak governance, leading to disparities in access

to government services and investment prospects.

• Infrastructure needs upgrading, and Public-Private Partnerships (PPPs) must

be widely adopted to improve Africa's infrastructure.

• Women face challenges with limited access to technology, social customs,

and financial services. Financial service companies are less motivated to sell
to women, and they struggle to connect with them through traditional
marketing channels.
 Digital currencies and the future of the monetary system
• The economy is experiencing a technological revolution, lowering costs and disrupting industries like taxis
and print media. The Covid-19 pandemic has accelerated digital change, with new players entering the
digital economy to provide services.

• The technological revolution has significantly impacted the financial system and money design, enabling
real-time prices on primary FX venues and monitoring market order books 36,000 times per hour through
Project Rio.

• Payment services are the primary entry point into finance, attractive for digital disrupters due to their low
capital-intensive nature and valuable cross-selling information, leading to a surge in digital payment
innovation.

• Payment innovations, such as real-time gross settlement (RTGS) systems and fast retail payment systems,
have been developed over years. Central banks worldwide have implemented these systems, which
operate almost 24/7. Examples include the Unified Payment Interface (UPI) in India, CoDi in Mexico, PIX in
Brazil, and FedNow proposal in the US.

• The existing monetary system is not a fixed path, with many attempts to innovate in less traditional fields
like digital currencies. While account-based money has been digital for decades, digitising all money,
including cash, is neither desirable nor realistic.

• Narayana Kocherlakota, a renowned monetary theorist and former Federal Reserve Bank of Minneapolis
president, argued in 1998 that money serves as a public, accessible device that records who owes what to
whom, replacing the complex web of bilateral IOUs.
 The Idea Of Money :

• The concept of money as the economy's memory leads to two key decisions for
designing digital money: ensuring the memory is always correct, ensuring the
integrity and safety of the payment system, and determining access rules based
on the role of a central intermediary or decentralized governance system.
• Additionally, proper identification and privacy in the payment system must be
established, with appropriate safeguards in place to protect privacy.
• The technological revolution has significantly impacted the financial system
and money design, enabling real-time prices on primary FX venues and
monitoring market order books 36,000 times per hour through Project Rio.
 Bitcoin:

• Bitcoin, a decentralized consensus protocol by Satoshi Nakamoto, is more of a

speculative asset than money. Its value backing is lacking, making it a poor store
of value. The Bitcoin market is concentrated and opaque, with research evidence
on price manipulation. It should be seen more like a community of online gamers.

• Bitcoin may collapse due to its energy-intensive "proof of work" protocol, which
relies on miners for security. As Bitcoin's supply reaches 21 million coins, miners'
"seigniorage" will decline, leading to increased wait times and vulnerability to
major attacks. As Bitcoin approaches its maximum supply, it is essential for
“Beyond the doomsday economics of ‘proof-
investors to be aware of this potential threat.of-work’ in cryptocurrencies”, BIS Working
Papers, no 765, January 2019;
S Shanaev, A Shuraeva, M Vasenin and M
Kuznetsov, “Cryptocurrency value and 51%
attacks: evidence from event studies”, The
Journal of Alternative Investments, Winter,
2020; blocksdecoded.com;
bravenewcoin.com; btcmanager.com;
coinbase.com; Coindesk.com; deribit.com;
github.com; medium.com
 IS Bitcoin Safe?

• Stable coins, cryptocurrencies that aim to stabilize their value against sovereign fiat
currencies, are gaining popularity.
• Facebook's Libra, renamed Diem, was initially marketed as a "simple currency for
billions" pegged to stable currencies like the US dollar and euro.
• However, there are governance concerns as private entities issue their own currency and
maintain asset backing.
• Historical examples show that there may be incentives to deviate from appropriate asset
backing, such as investing in riskier assets for higher returns.
• Private stable coins cannot serve as the foundation for a sound monetary system, but
they need to be heavily regulated and supervised to build on existing central bank trust.
• Milton Friedman argued that a stable monetary framework is essential for the effective
operation of a private market economy.
• In the digital age, the central bank must play a pivotal role in ensuring the stability of
digital money, ensuring the elasticity of the aggregate supply, and overseeing overall
system security.
• Access to digital money should be arranged around verification of identity, such as in
bank accounts, or the validity of the object being traded, such as with cryptography, like
in physical cash. This ensures the system cannot fail and cannot tolerate serious mistakes.
 Digital Age

Money is a memory of society's economic interactions, and the need for identification is crucial for maintaining financial
relationships. Economic transactions create a web of long-term relationships between suppliers, intermediaries, customers,
and borrowers and lenders, sustaining financial relationships through the identification of all counterparties and traceability
of underlying transactions. Historical examples show that identification has been critical to allow commerce to flourish, such
as the use of bills of exchange in 18th century Europe and the Maghreb traders of the 11th century.

In today's digital age, identification is key to government benefits like pensions and cash transfers, as well as the safety of the
payment system, preventing fraud, and supporting anti-money laundering and combating the financing of terrorism. There are
trade-offs between access and traceability, but good identification can help prevent money laundering or tax evasion, giving
law enforcement authorities new tools to fulfill their mandate.

A purely anonymous system will not work, and the majority of users would accept keeping basic information with a trusted
institution, such as their bank or public institution. The idea of complete anonymity is a chimera, as users must leave a trace
and share information with financial intermediaries, making it easier for them to work online and prevent losses.
Today we have the possibility to produce a technologically superior representation of central bank money. This can combine
novel digital technologies with the tried-and-true characteristics of central banks – such as trust, transparency, legal backing
and finality – that others would need to either rely on or create for themselves from the ground up.
 Designing central bank digital currencies

Central bank digital currencies (CBDCs) are two types of digital currencies that could potentially disrupt the existing financial
system.
The first type is in the wholesale realm, where digital central bank money for wholesale purposes already exists in the form
of central bank reserves. Privately issued wholesale digital currencies, also known as utility tokens or wholesale stable coins,
are not separate currencies but still depend on central banks for the finality of clearing and settlement.
The second type is in the retail space, where retail digital currencies could be used in daily transactions by households and
businesses, potentially upending the existing financial system. A new BIS survey shows that 86% of 65 central banks are now
doing some kind of research or experimentation with CBDCs. Increasingly, central banks are moving beyond research towards
actual pilots, with live CBDCs such as the Sand Dollar project in the Bahamas and large-scale pilots across China. The Boston
Fed is working with the MIT Digital Currency Initiative on retail CBDC research that will be open source for all to review.