Dr. I. Navena Nesa Kumari and Dr. A. Indira, International Journal Of

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Dr. I. Navena Nesa Kumari and Dr. A. Indira, International Journal of Research in Engineering, IT and Social Sciences, ISSN 2250-0588, Impact Factor: 6.452, Volume 08 Issue 05, May 2018, Page 154-160 A Study on Fin-Tech at Global Markets

Dr. I. Navena Nesa Kumari1 and Dr. A. Indira2 1(Research Associate, Loyola Institute of Business Administration, Loyola College, Nungambakkam, Chennai, India) 2( Research Co-ordinator, Professor of Economics, Loyola Institute of Business Administration, Loyola College, Nungambakkam, Chennai, India) Abstract: Fin-tech refers to innovative financial services or products delivered via technology. From the global financial survey it has been observed that there is a need to find out the impact of Fin-tech on GDP of three countries such as China, India and Brazil. The purpose of the paper is to investigate whether the GDP of the global fin-tech market has an impact on the utility of the financial services. The study includes the data from EY Fin-tech survey 2017. The present study aims to investigate which of the financial services such as money transfer and payments, savings & Investments, Financial planning, Insurance and Borrowing, has been influenced more by the country such as China, India and Brazil, and the reasons for the advancement in the financial services from 2015 to 2017. The research study stated that money transfer, payments, and financial planning are the much influenced financial services in all the three countries. The study concludes that there is a relationship exists between GDP and the Fin-tech Adoption rate. The study states that China stood first in the global financial services market, when compared with other two states such as India and Brazil. All the three countries focus at upgraded technologies. It has been stated in the Fin-tech report 2017 of India, that the fintech services are initiated to bring innovative technologies for the near future. They have three major upgraded technologies, which helps in the process. They are the Artificial Intelligence, Machine Learning, and Block chain, which will mark a digital identity to the interface. Keywords: Fin-tech, Financial services industry, Global Markets, GDP growth; Utility services.

I. FIN – TECH: AN INTRODUCTION Fin-tech is a financial technology that describes an emerging financial service sector in the 21st century. It is software that aims at providing financial services with the use of modern technology. Nowadays fin-tech companies started competing with the banks in most areas of the financial sector to sell the financial services to the customers. Fin-tech financial service providers based on digital technology, is revolutionizing the way in which Financial services such as money transfers, savings, Insurance Investments etc were conducted, with increased convenience and lower operational costs being its differentiators (Arner, Barberies & Buckley, 2015; Chuen Le, & Teo, 2015). In late 80’s people always prefer walking to the main branch; fix an appointment with the bank officials and put together to form an Investment. But in the recent scenario people prefer easy and quick banking services at the door step. The fin-tech sector is experiencing a third era in its evolution – fintech 3.0 – with various new start-ups and established technology companies it also started to provide financial products and services directly to the public (Arner et al. 2015). The reports of EY fin-tech survey 2017 results stated that it is mandatory to analyse the reasons for the growing financial markets from 2015-2017. It is initiated from the survey that China, India and Brazil ranked top when compared with all the other countries chosen for the study.

II. LITERATURE REVIEW Fin-tech refers to innovative financial services or products delivered via technology. Fintech corporations are mostly micro, small or medium-sized firms. The company does not have a lot of equity, but definitely have an idea of how to introduce and improve existing services in the financial services market. The Fin-tech start-ups are constantly increasing, as an effect venture investment and crowd-funding are used to finance Fin-tech firms. Hence the Fin-tech start-ups have helped to improve the efficiency of the financial system. (Vlasov, 2017; Vovchenko et al., 2017; Setyawati et al., 2017). While on the other hand it has been stated that innovations in the financial services sector has not improved the overall efficiency of the economic system, which can be derived from the lack of new entry and competition (Philippon, 2016). One of the key issues at the current academic, practitioner, and policy debate on banking and fin-tech (Chiu, 2016; Gurdgiev, 2016; Zetzsche, Buckley Arner, & Barberis, 2017) is whether these new entrants will eventually displace traditional banking institutions much in the same way as digital media has disrupted publishing and advertising or, alternatively hurt banks profitability, as is currently the issue with online education eroding higher education industry profits. Lee and Kim (2015) conceptually defined fin-tech as a new type of financial service based on IT companies' broad types of users, which is combined with IT technology and other financial services like remittance, payment, asset management and so on. Fintech includes all the technical processes from upgrading http://indusedu.org Page 154

This work is licensed under a Creative Commons Attribution 4.0 International License Dr. I. Navena Nesa Kumari and Dr. A. Indira, International Journal of Research in Engineering, IT and Social Sciences, ISSN 2250-0588, Impact Factor: 6.452, Volume 08 Issue 05, May 2018, Page 154-160 financial software for programming a new type of financial software which can affect a whole process of finance service. Therefore, fintech can improve the performance of financial services and spread the finance service combined with mobile environment. Lee and Teo (2015) stated fin-tech refers to innovative financial services or products delivered via technology. LONDON Business School Review the founder of the UK-based investment crowd-funding platform Crowd Bank says fin-tech is about “changing processes, changing services, changing costs in a positive manner.” (Anikina et al., 2016) stated that there are two main reasons for the emergence of fin-tech companies. The global financial crisis of 2008 has demonstrated the shortcomings of the traditional banking system that leads to the financial crisis. The emergence of new technologies which aids to provide the mobile technology easy of use through visual information, and through the cost of financial services. Hence this new emerging sector will hit the top of the roof by 2020. Thus there is a need to study the reasons for the growth of the financial sector for top performing countries, which will help the other countries in the form of benchmarking strategies. Importance of fin-tech services - discussion Fin-tech is a movement towards the digitization, decentralisation and disintermediation of economic transaction powered by information technologies such as peer-to-peer networking, big data analytics, machine learning, block chain technology and open API’s (Catalini, Hala burda, King & Vergne 2017). It is important to highlight some of the characteristics of the financial services industry of China, India and Brazil. According to the World Bank (2015), the banking industry in the GCC is bank based with NBFIs) (non-financial Institutions) having a limited presence and has low penetration rates. The sector is largely dramatically owned due to high barriers to the entry, where public ownership and Industry concentration. It is drawn that the long-term impact of financial service sector on the economic growth has been weaker when compared with other regions. Chaia et al 2010 stated that nearly 2.2 billion financially unserved adults live in Africa, Asia, Latin America and the Middle-East consisting of 8% of population with high income groups. The study revealed that these people are the potential users of Fin-tech services. These people are potentially using the Fin-tech services than the banking services. This is because the fin-tech services are faster, cheaper and more profitable than the services provided by banks. But the Sharf (2016) study stated that a survey of 10131 people across Australia, Canada, Hong Kong, Singapore, the UK and the US about their use of Fin-tech products revealed that only 15.5% of the respondents are using non-banking services, and that are expected to increase rapidly in future. Nearly 25% of respondents indicated that they are using non-banking services often and in normal practice they are using only 2 to 3 non-banking products. This study indicates that the users of banking services are potential customers of Fin-tech services as well. The report by Accenture on global management consulting technology service and outsourcing company) stated fin-tech as one of the fastest growing sector of the economy. In 2014 the Investments in the Industry have reached 12.2 billion dollars. But this is only 930 million dollars by 2008. So, the survey stated that a highest increase of investment was observed in Europe. Svetlana Saksonova (2017) explains how the customers of financial services using the innovative technologies offered by Fin-tech companies and traditional fin-sector (such as, Insurance companies) are prepared to use fin-tech services. This paper clarifies how the consumers of Latvia are informed about fin-tech services, their convenience, speed and safety. The results of the study stated that Latvian society is not ready to utilise the services provided by Fin-tech, but prefers more of the banking services. Yap, Brian (2016). Studied the role of hong-kong in fintech start-ups. The paper discussed about the various issues and relationships with the corporate partners, cyber resilience and information sharing and ensuring the company’s complaint key issues in Asia pacific. This paper states that the financial technology innovation has been tested in UK using the Financial Conduct Authority (FCA), and at Hong Kong it is Hong Kong Monitory Authority, making inroads into helping the population understand fin-tech related regulations. Bothe the agencies have launched their own version of Fin-tech sandbox. This leads to the increasing costs of compliance. Marie 2016, Study stated the emergence of digital banks has enhanced the consumers experience and the capacity to manage personal finance, the banks need to update to the increasing demands of consumers for their personalised digital banking services. The banks are challenged by the companies of fin-tech which offer various financial services. The Fin-tech services with PFM provide the innovative offer to both consumer and banks. The research has filled the literature by explaining and adopting the use of personalised financial tools. Cristofer Carolan 2017, HSBC’s global network was treated as a key differentiator among its competitors and the primary lure for business customers. Therefore, the banking sector is experiencing a paradigm shift, whereas HSBC needs to recalibrate its global network to remain stagnant in a fast changing Industry. Hence HSBC executed a multi-pronged approach to enhance international connectivity for its business customers. Elements such as technology, partnerships and emerging markets make up the challenge for HSBC’s network and each must be addressed using unique strategies. The analysis helps to isolate key gaps to be addressed and suggest various strategies to secure its relationship with business customers. http://indusedu.org Page 155

Andrew Sheng (2016) has written a book on Global Shock, Risks and Asian Financial Reform, it’s about an overview and summary about macro prudential supervisory systems and its impact on development. The paper discussed about the issues and challenges for the legal and institutional framework. It explains about financial Integration and co-operation to support financial stability, which helps in financial supervision and development challenges. The book is an outcome of an ADB research project on the regulatory reform of post GFC which is very useful as a compendium and reference on regulatory issues for Asia upto2012. Yap Brian (2017) stated that accounts with payments banks are made flexible to know the customer’s anti-money laundering and combating the financing from terrorism norms. There is no much difference between the small account and regular account which may not require compliance may become difficult to manage for payment banks. In KPMG survey of fourth quarter 2016 stated that there is a significant decline in venture capital investment in India, which explains the domain knowledge and familiarity with the market, where foreign investors are expected to have a joint venture with Indian partners to acquire a controlling stake. Douglas W Arver (2016) has done an evolutionary analysis on 150 years of Fin-tech. The paper stated that there are three major versions in Fin-tech, and explained Fintech 1.0 version from 1866-1967 as an analogue to digital period era. It is a period of strong financial globalisation. From 1967-2008, it is a period where there is a increased digitalisation due to development of digital technology for communications. The third would be Fin-tech 3.0, where new start-ups and established technology companies have emerged and delivered financial products and services to business, public and banks. The study explains the various Eras’ in Fin-tech sector that attracted the interest of regulators in both developed and developing countries. Research on Fin-tech is also gaining momentum at Chine, India and Brazil. This paper will showcase Influence, usage and various types of financial services at China, India and Brazil and to find out the reasons for the advancement in the financial services at the recent past. Need for the study The user adoption rate of fin-tech services has been increasing and the changes underlying the users behaviour requires a lot of marketing strategies and consumer education. The government of India has been taking several efforts to promote digitalisation of financial system and reducing cash transactions to the most. It has been found from the budget speech 2017 that Fin-tech sector seems to have more clarity in the near future. It has been stated in the study (Fin-tech Trend Report 2017) that India offers the highest expected return on investment on fin-tech projects at 29% with a global average of 20%. A strong push for financial digitalisation and start-up activity has led to the introduction of policy initiatives which paved a way for the strong foundation to the financial sector in India. The program initiated in India includes tax exemptions, patent reforms, opportunities for mentorship and supplementing government funding. Some of the schemes of inclusion involve Pradhan Mantri Jan Dhan Yojana, which is considered to be the world’s biggest inclusion program. It seems to be the biggest Inclusion program, which aims at facilitating the creation of bank account to millions of Indian population that belongs to the underserved sections of India. Objectives of the study  To analyse and find out the relationship between Fin-tech adoption rate and GDP growth rate of the three countries such as China, India and Brazil in the global market.  To identify which financial services was more influenced by the customers at China, India and Brazil.  To find out the reasons for the advancement in the financial services from 2015 to 2017. An Overview of top performing Fin-tech firms of China, India and Brazil The start-up Fin-tech companies for the three countries such as China, India and brazil has been discussed below. The discussion involves the evolution, tie-ups, collaboration and the success behind each of the top performing Firms. Ant Financial - China Ant Financial Services Group is formerly known as Alipay is an affiliate company of the Chinese Alibaba Group. The company is the most valuable Fin-tech company with the world’s largest mobile and online payments platform. Ant financial was ranked sixth in fortunes change the world list 2017. It is recognized for the positive environmental impact of Ant Forest. It is the world’s largest platform for tracking individual’s carbon foot prints. ANT forest allows the Fin-tech users to collect “energy Points” through their action in reality that can be used to grow in the reality that can be used to grow virtual and real trees with 230 million Fin-tech users of Alipay activating ant forest Accounts. Zerodha – India It is an Indian financial service company that offers brokerage free-equity Investments retail and Institutional broking, currencies and commodity trading and mutual funds. Zerodha founded in 2010, and it is known for its discount pricing model and utilisation of Innovative technology. From 2017 it has become the largest discount brokers in India, which contributes 5% of retail trading volumes on Indian stock exchanges. This company is debuted as one of the “India’s first discount brokerage” model which is popular in developed markets.Zerodha has a client base of 6 lakh customers. http://indusedu.org Page 156

Nubank – Brazil Nubank, a financial services start-up based in Brazil. The Financial service company offers customers a no-fee, low-interest credit card that enables the customers to manage with their IOS (iPhone operating system) and Android devices. David Velez is the founder and the chief Executive officer of Nubank. The Nubank has captured the largest financial services market at Brazil. Recently the company used Amazon Web Services to build, deploy and run its credit card processing platform on which customers can track and control their purchases. By using Amazon Web Services, Nubank developed its credit card processing platform in only seven months and can add features with ease reported by Marcus Ferreira – AWS Infrastructure Nubank.

III. METHODS AND MATERIALS The methods of the study involve a secondary data analysis. The data has been drafted EY Fin-tech adoption index thereby comparing the three top performing countries in the global market. The countries considered for the study includes China, India, and Brazil. The data drawn for the study has been compared with GDP growth rate and Fin-tech adoption Index. The comparison between these two variables will show how the countries growth factor is associated with the financial services.

IV. ANALYSIS AND INTERPRETATION The table representing the Fin-tech Adoption Rate and Growth rate in GDP for the countries such as China, India and Brazil has been drafted. Growth Fin-Tech rate in Adoption GDP Countries Rate COMPANIES CUSTOMERS ANT 6.90% China 69% FINANCIAL 670 MILLION 6.70% India 52% ZERODHA 3 LAKH 2.80% Brazil 40% NUBANK 1 MILLION Source: EY Fintech Adoption Index 2017 From the above table, it has been stated that there is a relationship exists between Fin-tech adoption rate and GDP growth rate of China. The increase or decrease in the Fin-tech adoption services has a direct impact on the GDP of the country in china. Whereas, in India they exist a slight relationship. It has been revealed that Fin-tech plays a major role in the GDP growth rate of top performing countries. The mean and standard deviation for the GDP and Fin-tech Adoption rate has been drafted below: Descriptive Statistics Std. Mean Deviation N GDP 5.47 2.312 3 FINTECH 53.67 14.572 3 The correlation for the GDP and the Fintech adoption rate has been drawn below Correlations Pearson GDP FINTECH Correlation 1 0.837 Sig. (2- tailed) 0.369 GDP N 3 3 Pearson Correlation 0.837 1 Sig. (2- tailed) 0.369 FINTECH N 3 3 It has been found from the above table that there is a significant relationship exists between GDP growth rate and Fin-tech Adoption rate for all the three countries in the global market has been predicted. The analysis includes the study variables chosen for the study. The details of the adoption rate for the two alternative years of Fin-tech. The adoption rate is drafted for three countries has been analysed.

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Fin-tech Adoption Index Adoption rate for 2 years Adoption Rate ( % ) Fin-Tech Services 2015 2017 China India Brazil Money Transfer & Payments 18% 50% 83 72 60 Savings & Investments 17% 20% 22 20 21 Financial Planning 8% 10% 58 39 29 Insurance 8% 24% 46 20 15 Borrowing 6% 10% 38 47 0 Source: EY Fin-tech Adoption Index 2017 The table of EY Fin-tech Adoption Index 2017 stated that there is a huge Increase in the Adoption rate of Fin-tech services from 2015-2017. It has been observed that money transfer and payment has increased from 18%-50%. Whereas Insurance services has increased from 8% to 24%, also there is an increasing trend in borrowing from 6%-10%. The graphical representation for the same has been drafted below.

The Fin-tech Adoption rate for Fin-tech services of Money transfer and payments, savings & Investments, Financial Planning, Insurance, and borrowing for the three countries such as China, India, and Brazil has been drafted below.

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The above graph stated that the china stands first in the Adoption rate of Fin-tech services among the three countries. They play a major role in the services such as money transfer and payments, savings and Investments, Financing planning and Insurance. Also it has been observed that India gains 47 percentages on borrowings. In all the other services India stands next to china. Brazil stands third for all the fin-tech services adopted by the customers. It has been observed that there are a zero borrowings by the country of Brazil.

V. CONCLUSION It has been observed from the study that money transfer, payments, and financial planning are the much influenced financial services in all the three countries. The study concludes that there is a relationship exists between GDP and the Fin-tech Adoption rate. The research states that China stood first in the global financial services market, when compared with other two states such as India and Brazil. This is because china had adopted the three strategies for the action plan. They are the Partnership ventures, Multiple Collaborations and special focus on key technologies. The next to china stands India, where there are more regulatory and government push factor for fin-tech has been evolved. They include Aadhar Enabled Payment system. United payment Interface of RBI, and Bharat bill payment system (BBPS). It has been stated in the Fin-tech trends report 2017 that there are some key initiatives taken by the regulators. They are RBI, SEBI, TRAI Telecom Regulatory Authority of India, and Insurance regulatory and development Authority. The brazil is the third important top performing companies in the global market. In Brazil the NUBank in collaboration with AWC Amazon Web services has introduced an application which gives the solutions to the end-to-end customer services to the Fin-tech users in the market. Thus Brazil is also working in collaboration with the banking and financial web services. It has been noted that the success stories have their own identities. All the three countries focus at upgraded technologies. It has been stated in the Fin-tech report 2017 of India, that the fin-tech services are initiated to bring innovative technologies for the near future. They have three major upgraded technologies, which helps in the process. They are the Artificial Intelligence, Machine Learning, and Block chain, which will mark a digital identity to the interface. Thus enabling the customers to meet their requirements within no sequence of time for rendering that service.

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