Everyday life nowadays could be stagnant without technology which is necessary at every step of living. During the ongoing pandemic, the demand for financial technology is increasing as it is bringing a variety of products and benefits to people.
However, the idea of combining financial sector with technology is not new. In 1919, British economist John Maynard Keynes, in his book "The Economic Consequences of the Peace", spoke of connection between the two. The current century has seen advent of virtual or digital currency, digital or e-wallet and more digital payment systems. So this combination has revolutionised the financial sector around the world.
For the past five years, Forbes magazine has been publishing a list of the top 50 financial technology companies under the title "Fintech 50". Nineteen new innovative fintech companies have been placed in the list published this year. Last year there were 20 such companies in the list. It is observed that about 40 per cent of the companies included in the list are new innovative fintech companies.
Investors around the world invested more than 53 billion last year in the new innovative fintech companies. Digital or online banking is not lagging behind, as they do not require traditional branch networking for transactions. This type of banking has been introduced in the developed countries for a long time. Investment in digital banking increased from US$3.00 billion in 2018 to US$7.8 billion in 2019. In 2019, investment in insurance technology and payment technology also increased by 55 per cent and 20 per cent compared to 2018 and it was US$6.8 billion and US$15.1 billion respectively.
Now let's take a look at the new ideas and new uses of technology of these 19 startups that have found a place in the list.
The largest investment was by "Money Leone" in the digital banking category. This startup came on the field with a fund of US$207 million. The startup has so far attracted 6.0 million subscribers due to their new ideas. 'Money Leone' is offering some benefits to its customers free of cost. And one of them is to search all the information of the account, transfer of money, loan-related information and reports, free ATM transactions and 12 per cent cash-back system for ATM purchases.
"Dave" came with US$76 million in funding, which now has US$90 million in revenue including 5.0 million subscribers. The company has come up with more innovative ideas including free transactions at ATMs, up to US$100 in advance and automated budgeting based on monthly expenses. Billionaires like Mark Kuban have invested in this new startup.
Another startup called "Lively" has created a platform styled Digital Health Savings Account and has saved customers US$200 million through these accounts. A startup called "Propel" has come up with the least amount of funds i.e. only US$18 million funds. Renowned tennis star Serena Williams has invested in it. To start this startup, its founder did not hesitate to leave a cushy job as a product manager at Facebook. Propel has introduced Electronic Benefit Transfer (EBT) facility in its mobile apps. Under Supplement Nutrition Assistance Programme (SNAP) of the US Department of Agriculture, the US government provides additional monthly financial assistance or benefits to purchase nutritious food.
These monthly financial assistance or benefits can be cash or purchase nutritious food through Propel mobile apps.
New concepts have also been introduced in insuretech or insurance technology. Ethos uses predictive technology which can tell life insurance rates in about 10 minutes via its app and verifies applicants' self-reported data with their actual medical and pharmacy records. This quality of being able to predict the future of the Ethos startup has attracted customers. The founder and co-founder of Ethos were roommates at Stanford Business School and Ethos was designed there.
After taking a higher degree from MIT, a couple started a startup called "Insurify". Their apps uses artificial intelligence and AI can say which insurance policy is the best for the customers of house or car insurance. Within two minutes, AI should compare quotes from the 10 best insurance companies. Artificial intelligence adjusts the budget to the customer's personal needs to determine which insurance will be best for the customer. Every customer who uses Insurify can save an average of US$400 a year on their car insurance for the future.
Payment startups have also come up with a number of new ideas. The payment startup called "Fattmerchant" is basically a credit card processing company. It basically makes debit and credit card payments to small business which is 30-40 per cent cheaper and easier than in the traditional processes.
"Plastiq" is another startup for small businesses. With this startup small businesses can pay a variety of monthly expenses through credit card at only 2.5 per cent fee. More than 50,000 small businesses are connected to it and more than US$4.0 billion in transactions are made annually through these apps.
Real estate startups have also come out of the traditional system of home buying and selling and adopted modern and practical systems. There is a startup called "Divvy Homes" who buys their client's selected home and then becomes their landlord. If the tenant wants to buy the house later, s/he can buy it by paying 2.0 per cent advance as fee and a portion of monthly rent can be converted into a down payment.
Blockchain and cryptocurrency startups have introduced new concepts. 'Everledger' has come up with a way to track 2.0 million diamonds in jewelry stores with their blockchain technology.
These were the success stories of the newcomers. However, some of them have gone from failure to success. Jason Brown and Jasper Platz, two classmates from the University of Chicago, created a credit card loan payment apps called "Tally". Their idea has gained wide popularity. The founder and co-founder had earlier set up a solar finance company which was acquired by Solar Universe in 2009.
In this technology-dependent world, ideas have also become technology-dependent. So the founders of startups are combining technology with new ideas to get their products to the human race. In the financial sector, new innovations will come only when technology and new ideas come together. Such innovations require investment as much as new ideas. Neighbouring India has nearly doubled its investment in financial technology to US$3.7 billion last year.
A new entrepreneur can't expect anything but a message of hope when s/he comes to the bank with different types of technology with her/his new ideas. Entrepreneurs interested in these fields can approach venture capital which is becoming popular among new entrepreneurs of the country as well as other countries.
The use of various financial technologies is increasing day by day in Bangladesh. Not only transactions but also shopping, mobile recharge, utility and credit card bill payment, ride sharing payment and many more can be done through mobile financial services such as Nagad, bKash, Rocket, Nexus Pay, Cash, SureCash as well as iPay and Dmoney.
The government took an initiative to set up a venture capital company called "Startup Bangladesh Limited" in 2019 under the Information and Communication Technology Department. New ideas and new innovations can come from students. And that's why last year, for the second time, Startup Bangladesh organised a national level competition for students - 'Student to Startup'. A total grant of Tk 10 million has been provided for 10 startups. Apart from training on various financial technologies, Startup Bangladesh provides funds to startups. 'Truck Lagbe', a popular transportation platform, was funded by Startup Bangladesh. There are also healthcare platforms such as 'Jalpai.com', and 'Moner Bondhu' that have been supported with funds.
New ideas and new innovations will not only help development of the country but also create employment opportunities for the youth. It is expected that one day Bangladesh will be able to move out of the 116th position in the Global Innovation Index and be a top performer. The government will hopefully go one step further in realising its dream of building a digital Bangladesh.
Source: Forbes, Wikipedia, Start-up Bangladesh
Rafiqul Islam is Deputy Managing Director at Shimanto Bank and ASM Ahsan Habib, Principal Officer at Uttara Bank Ltd.