MID-TERM REPORT Subject: Money and Banking Topic: The Growing Influence of Fintech Financial Technology in the Banking Industry and Their Impact on Traditional Models Group: 3 TCHE303.2
FOREIGN TRADE UNIVERSITY …… ***…… MID-TERM REPORT Subject: Money and Banking Topic: The Growing Influence of Fintech (Financial Technology) in the Banking Industry and Their Impact on Traditional Models Group: Class: TCHE303.2 Supervisor: PhD Nguyen Thu Thuy MSc Hoang Huy Khoi Hanoi, June 2023 STUDENTS OF GROUP 3: FULL NAME STUDENT ID TRẦN HOÀNG ANH 2012150012 NGUYỄN TÚ ANH 2114410022 ĐOÀN HOÀNG TUẤN LINH 2012150050 ĐẶNG MINH NGUYỆT 2114410139 VŨ THANH QUÂN 2112450614 VŨ NGỌC TÙNG 2112450616 TABLE OF CONTENT ABSTRACT I INTRODUCTION Definition of Fintech (Financial Technology): Overview of Banking Industry: 2.1 History of Banking Industry 2.2 Current situation of Banking Industry II THE GROWING INFLUENCE OF FINTECH IN THE BANKING INDUSTRY The origin and the development of Fintech 1.1 The primary of Fintech 1.2 The development of Fintech 10 Key technologies driving Fintech innovation 13 III FINTECH’S IMPACT ON TRADITIONAL MODELS 15 Impact on Banking Industry 15 1.1 Introduction of new products and services 15 1.2 Disruption on banking system 17 Impact on Traditional Banking Model 19 2.1 Challenges for Traditional Banks 19 2.2 Challenges for the Vietnamese Banking System 20 2.3 Opportunities for Traditional Banks 21 Case Study - Fintech’s Impact on Traditional Credit Scoring Models 23 CONCLUSION 26 REFERENCE 28 ABSTRACT The monumental challenges we face today, such as the COVID-19 pandemic and the war in Ukraine, have reminded us that turbulent times are often accompanied by innovation One such example is the rapid acceleration of technology-enabled innovation in financial services, known as fintech Fintech has become increasingly important for maintaining business activity and financial services during a time of social distancing, as pandemic shutdowns have amplified its importance Fintech companies use technology to provide financial services in new and innovative ways This has led to a number of benefits for consumers, including increased convenience, efficiency, and affordability Fintech has also made financial services more accessible to people who have been traditionally underserved by traditional banks The rise of fintech is having a major impact on the traditional banking industry Traditional banks are facing increased competition from fintech companies, and they are also being forced to adapt their business models to keep up with the changing landscape Some traditional banks are partnering with fintech companies, while others are investing in their own fintech initiatives Every day, headlines attest to the seismic shifts that fintech is bringing to the financial services industry, driven by a dramatic expansion of internet access and smartphone use, combined with lower-cost computing and data storage As financial products, payments, and business models evolve - even the concept of money itself - so too are market players and the structure of the markets in which they compete Large telecommunications and information technology companies, retail chains, and small start-up companies are joining traditional banks and nonfinancial institutions in providing services Digital financial services can play a significant role in maintaining active credit markets to support a resilient and inclusive recovery, leveraging data, analytics, and new business models such as embedded finance They can also create new opportunities to make the global financial system more efficient and inclusive by overcoming geographic and physical obstacles to services and by making information more widely available to consumers and providers Policy makers globally have embraced fintech development to promote innovation and growth of the digital economy For regulators and supervisors, however, digital transformation has also created challenges in balancing innovations with the safeguarding of competition, financial stability and integrity, consumer protection, and data privacy I INTRODUCTION Definition of Fintech (Financial Technology): Fintech (a combination of the terms “financial” and “technology”) is used to describe the application of software and hardware to enhance or automate the delivery and use of financial services, making them faster, easier to use and more secure The fintech industry includes everything from payment processing solutions to mobile banking and insurance apps, cryptocurrency, investment apps, and so on When fintech emerged in the 21st century, the term was initially applied to the technology employed at the backend systems of established financial institutions, such as banks From 2018 or so to 2022, there was a shift to consumer-oriented services Fintech is not a new industry, it’s just one that has evolved very quickly According to KPMG (Klynveld Peat Marwick Goerdeler) International Limited, one of the Big Four accounting organizations, global investment in FinTech companies hit US$24.7 billion across 1076 deals in 2016 Technology has, to some extent, always been part of the financial world, including different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management, and so on Some fintech trends to keep an eye on include: digital wallets (like Zalo pay, Momo), Blockchain, and other things Document continues below Discover more from: Tài tiền tệ TCH301 Trường Đại học… 580 documents Go to course 61 10 12 16 BỘ ĐỀ TRẮC NGHIỆM Tài tiền tệ 97% (59) Trắc nghiệm ơn cuối kì Tài tiền tệ 100% (12) Bộ câu hỏi lý thuyết tài tiền tệ Tài tiền tệ 100% (5) Phân loại nội dung loại hình bảo… Tài tiền tệ 100% (3) [123doc] - logichoc-dai-cuong-bai… Tài tiền tệ 88% (8) [TN] BUỔI - TỔNG 15 QUAN - TTTC Tài tiền tệ 100% (2) Overview of Banking Industry: 2.1 History of Banking Industry Banking has been in existence since the first currencies were minted and wealthy people realized they needed a safe place to store their money At this time, banks were to play a major role in facilitating trade, distributing wealth, and collecting taxes as they today Religious temples became the earliest banks because they were seen as safe places to store money The first bank was born around 2000 BCE in the ancient empires of Egypt, Assyria, India and Sumeria, with the exchanging of goods The ancient marketplace used various purchasing methods, including grain banks, barter systems and metal weights to measure value After several centuries, 500 BCE was time for the use of metal coins made from gold, silver or bronze Over time, coins of various sizes and metals began to be minted to provide a store of value for trade During the Roman empire, banking began shifting to private depositories or safes During the Tang Dynasty in China, inspired by his Silk Road travels and this unique Chinese method, Marco Polo introduced the idea of paper money to Europe, and banking became more widely used Having a standard currency made tax collection easier, so countries had a strong incentive to standardize Paper currency was also far less expensive to maintain than metal coins Banking was already well-established in the British Empire when economist Adam Smith introduced his invisible hand theory in 1776 Empowered by his views of a self-regulating economy, moneylenders and bankers managed to limit the state’s involvement in the banking sector and the economy as a whole This free-market banking concept first started being put to use in the United States of America as the country was emerging However, after the Revolutionary War, Secretary of the Treasury, Alexander Hamilton, created the first central bank in the U.S and a national currency was born In 1913, the U.S government formed the Federal Reserve Bank (the Fed) to monitor and oversee banking activity When World War I broke out, the United States became a global lender and the center of the financial world World War II saved the banking industry from complete destruction because the war required financial decisions concerning billions of dollars More importantly, domestic banking in the United States finally settled to the point where, with the advent of deposit insurance and widespread mortgage lending, the average citizen could have confidence in the banking system and reasonable access to credit The modern era had arrived The introduction of digital banks in the late 20th and early 21st centuries is one of the most significant Today, people need more than just a place to store their money Since their advent, neobanks have transformed to offer the most powerful digital solutions for banking 2.2 Current situation of Banking Industry The impact of technology on bank business models has been profound (Vives 2019) Technological advances have affected payment systems, capital markets activities, credit extension and deposit collection Disruption from technology has happened in many other areas, not just payments Entry in the different financial service segments has come from new types of providers: ‘FinTech’ and ‘BigTech’ FinTech providers of credit are more present when the country’s general development is higher and its banking system is less competitive, but less so when the country’s regulation is stricter Total global assets climbed to $154,211 in 2022, up 3.79 percent YoY from 148,583 in 2021, according to The Banker’s Top 1000 World Banks Ranking for 2022 The most prevalent trend in the financial services industry today is the shift to digital, specifically mobile and online banking (more on each of those in a bit) In today’s era of unprecedented convenience and speed, consumers don’t want to have to trek to a physical bank branch to handle their transactions Global fintech funding has cooled this year as funding conditions have become more challenging across most of the world In Quarter 3, 2022, overall fintech funding dropped 38% quarter-over-quarter (QoQ) to hit $12.9 Billion—comparable with Quarter 4, 2020 funding, according to CB Insights In Insider Intelligence’s Mobile Banking Competitive Edge Study in 2020, over 45% of respondents said they identify mobile as a top-three factor that determines their choice of FI, up from 38.0% in 2019—making it the second most important factor behind fees II THE GROWING INFLUENCE OF FINTECH IN THE BANKING INDUSTRY The origin and the development of Fintech 1.1 The primary of Fintech The fintech industry as we know it today did not exist before the late 1990s and early 2000s Nonetheless, fintech’s origins can be traced back to the advent of computer systems and the growth of electronic banking in the financial services industry in the 1970s and 1980s These early innovations set the stage for fintech’s expansion and development in the latter half of the 20th century and beyond The evolution of the fintech industry has been rapid and dynamic, with significant changes taking place year after year Even in the lending market, fintech’s reach remains small For example, the total amount of credit originated through peer-to-peer lenders in the UK in 2021 was £4 billion versus £316 billion by banks Similar patterns exist elsewhere, although peer-to-peer lending is more important in China and Japan than in other countries Figure Total global investment activity in Fintech Impact on Traditional Banking Model 2.1 Challenges for Traditional Banks The rise of Financial Technology (Fintech) has been a game-changer in the world of finance, challenging traditional banking models in profound ways Fintech has enabled customers to access financial services in an efficient, cost-effective, and personalized way, making inroads in areas traditionally dominated by traditional banks, such as payments, lending, and investment services - Increased Competition: Fintech firms are disrupting traditional banking models by offering innovative and customer-centric services This has led to increased competition for traditional banks, which must adapt to stay relevant 19