The Macleay Argus

From digital banks to crypto: Understanding financial technology

From digital banks to crypto: Understanding financial technology
From digital banks to crypto: Understanding financial technology

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Financial technology is an industry that's been impacting the way we live our day to day lives, whether we've been aware of it or not.

Even with its minimal roots, fintech has held an immense impact on our global economy, reshaping the ways in which we shop, invest, borrow and even make money.

As an emerging industry, there are a plethora of employment opportunities in fintech for professionals with a background in finance as well as technology.

But what about individuals looking to gain a background in both of these disciplines? As fintech is firmly here to stay, many tertiary institutes have begun to develop and offer their own fintech courses, ranging from undergraduate and associate degrees to a master of financial technology.

These courses are likely to appeal to young learners with an interest in business and technology. Given the predicted size of this emerging industry, however, it's likely that there will be employment opportunities to suit graduates with a range of interests, extending from the sciences and engineering to politics and humanities.

The landscape of the FinTech industry

Financial technology as an industry is rapidly being defined by two things: the widespread use of banking apps and, of course, cryptocurrency.

Financial technology is what allows us to utilise mobile banking whenever and wherever we may feel like it. Even individuals who aren't investing in Bitcoin and other types of cryptocurrencies, understand that fintech is the driving force behind these decentralised forms of finance as well.

It's important to note, however, that the landscape of the fintech industry is actually far more complex than many of us may believe it to be, and spans so much more than just digital banks.

In fact, fintech developers aimed to address some of the financial sector's most overlooked consumer pain points, including but not limited to insurance, lending, and capital markets.

Fintech as an industry is occupied by a myriad of different companies and bodies, including neo banks (or banks that exist solely online and rely on no existing banking infrastructure), digital payment platforms like Klarna and Australia's own global sensation AfterPay, investment firms, blockchain cryptocurrencies, and government bodies, networks or organisations like FinTech Australia who seek to cultivate a sense of community between remote professionals and others who may be working in all corners of the expansive fintech industry.

What is decentralised finance?

Understanding the potential of fintech to influence how our globalising world will make and receive payments in the near future must absolutely start by understanding the concept of decentralised finance.

What is decentralised finance? In the simplest terms, DeFi - as it's often called - is a form of finance that does not rely on centralised financial bodies, such as banks, brokerages, or currency exchanges. DeFi is a model of finance that relies on 'crowdsourced control', with most cryptocurrencies

Most DeFi models rely on blockchain technology as a method of tracking transactions made online. Cryptocurrencies use blockchains to ensure that digital transactions are kept secure, and to minimise the risks of individuals being scammed online or experiencing fraudulent transactions.

There are generally two types of DeFi models: cryptocurrencies (or digital/alternative forms of currency) like Bitcoin and programmable blockchains like Ethereum.

At the moment, Ethereum is outperforming Bitcoin in terms of its real-world monetary value, primarily because programmable blockchain technology requires significantly less energy to run.

Environmental impact, ethics, and other concerns of fintech

There has been some discussion over the past few years about the environmental impacts of decentralised finance. As cryptocurrencies and blockchain technology as a whole relies on the use of servers, the more users that technology has, the more energy their servers are likely to require.

Most critics of DeFi use carbon emissions as the foundation for their arguments against the widespread use of this branch of fintech.

Others have argued that the production and maintenance of DeFi models is an expenditure of energy that benefits nobody but those who make real-world profits from investing in cryptocurrencies. Consequently, a large portion of the global population sees no tangible benefits to DeFi and have come to view this new model as nothing but a superfluous appendage on the already monolithic beast that is modern finance.

On top of this, many individuals who get started with DeFi investments enter the process with limited knowledge regarding blockchains or other financial technologies, and as a result, cases of crypto scams have been increasing almost exponentially.

Even individuals who utilise blockchain technology tend to do so with caution and with an understanding that this technology can be susceptible to hacking. There are a great number of security concerns with DeFi, just as much as there are environmental and ethical concerns.

As fintech does solve many of our rapidly globalising society's existing concerns surrounding cultivating and maintaining a thriving worldwide economy, chances are increasingly high that the fintech sector will be here to stay, and that addressing these concerns will take many heads.

This in a nutshell, is precisely why fintech is predicted to be such a highly lucrative sector by market analysts.

Employment opportunities for fintech graduates

As you can imagine, with the space that this industry is predicted to expand into, there are a myriad of future employment opportunities available to any tertiary level students studying virtually any aspects that fall under the umbrella of financial technology.

This can include economics, business, ICT, and even politics or legal studies, as industry regulatory bodies will be required to oversee industry operations to ensure there are minimal disruptions with existing financial services.

It must also be noted that Australia is no stranger to the fintech industry, and that our own homegrown fintech sector is alive and well.

The acquisition of AfterPay by Twitter founder Jack Dorsey's digital payments company Square has bolstered our nation's fintech developers as well as banks and other financial institutions across the nation. There is a real potential to make a lasting impact on this rapidly growing neo-industry.