Fintech isn’t just changing the world of finance. It’s changing everyday lives. Emerging technologies such as AI, IoT and blockchain are making it possible to send, spend and manage money more easily than ever before. And every step forward soon becomes the norm in the eyes of consumers, meaning that all players in the financial services industry are having to evolve, and fast.
At the Rakuten Fintech Conference 2017, Rakuten founder and CEO Hiroshi “Mickey” Mikitani joined industry leaders to talk about the future of finance and discuss how their companies are adapting – and preparing for the even greater changes they see ahead.
A cashless future?
Mickey set the scene by envisaging a day when consumers will have no need for cash. “Are we going to see a cashless economy in the near future? In 30 or 40 years, I’m 100% sure it will take place. It might be even sooner,” Mickey told the panel.
“In the Nordics, you have countries that will go cashless probably within the next decade,” said panelist Ed McLaughlin, President of Operations & Technology at Mastercard. “Mastercard is in 210 geographies and regulatory regions and in every one of them the acceleration of electronic payments and the displacement of cash payments is inevitable.”
Japan, for its part, appears to be lagging behind on this trend.
“Five or six years ago Japan was far ahead of other countries,” said Mikitani. “We had Suica (a prepaid smart card accepted by most public transport operators), Rakuten Edy, all sorts of other e-money services, and of course, the e-bank transfer was common sense. But those advantages for us became disadvantages as we transferred to new platforms.”
The problem, explained Mikitani, is that while Japan’s platforms are old, they’re effective enough that companies have no real incentive to upgrade.
“The Japanese market is not big, but it’s not small either. It’s big enough for everyone to make a bit of money so many companies lack the ambition to go into other territories and innovate,” said Mikitani. “(Rakuten is) going to need to take a really strong leadership role when it comes to standardizing the industry and moving to an open platform.”
Riding the IoT wave
When asked about the biggest game-changer for finance over the past few years, McLaughlin pointed to the rise of connected devices.
“I think the biggest shift we’ve seen is how we’ve moved from being in the physical and offline world to having so much of our life come through connected devices. It’s changed how we entertain ourselves, how we interact with each other, how we educate ourselves, and it will fundamentally change how we transact.”
Mikitani echoed the sentiment. “After 20 years in the industry, it is becoming really clear that e-commerce is going to become the major channel for shopping and the division between online and offline commerce will become increasingly unclear.”
In order to succeed in this ‘third wave,’ companies must be able to see the forest for the trees, and understand the overall change propelling the fintech industry, said McLaughlin.
“I think the risk is that everyone looks at the surfer, they don’t look at the wave. They look at who’s up and who’s down, but what they don’t realize is that it’s an overall change that is propelling everything we do.”
Eventually, said McLaughlin, this shift to connectivity, will allow customers to be “freed from tyranny of the physical world” and lead to a more empowered consumer. “Your self-driving car will want to pay for its own parking and pay for its own fuel supplies. Your gaming system will have compelling offers that you will want to execute immediately in-game. Your intelligent house may reorder its own supplies.”
The need for fast commerce
Rohan Mahadevan, Senior Vice President of APAC at PayPal, focused on the changing expectation of consumers, pointing to the need for fintech companies to adapt to changing markets.
“The phone has actually changed our behavior and expectations. Because we have access to anything we want literally by looking down and clicking on it, we don’t want to wait in a line anymore. So our expectations have just increased tremendously.”
Thus, fintech players will need to adjust the services they provide accordingly, warned Mahadevan.
“We have become an impatient group of people. And that impatience is really important, because we have to feed that impatience with fast commerce,” he said.
More than tech
While technologies like AI and blockchain continue to be a hot topic in the fintech sector, panelists were careful to point out that innovative technology alone does not lead to successful company.
“Technology is just a means, and it keeps changing – to me it’s not really a long term competitive advantage,” said Mahadevan. “The minute after you build a technology, the next guy might build something better.”
Mickey agreed: “Of course people’s lives will be totally different in the future. All of these formats will eventually become obsolete… I don’t know what’s going to happen but I think it’s going to be a totally different world.”
“The consumer dictates what they want to do and we try to work to enable that,” said McLaughlin. “Nobody actually wants to make a payment. You’re trying to do something else. And all of our jobs is to make that something else easier. Whoever does the best at that, wins.”
Read more posts from the Rakuten FinTech Conference 2017 here.