In our first article in series on how the fintech industry is being covered at Davos 2017, PayPal CEO Dan Schulman and CEO of Ant Financial Services Group Eric Jing discuss the trends they see in the financial services industry as disruptors
Dan, given your status as one of the original payments disruptors, what trends enabled PayPal to be launched 15-20 years ago and what trends are enabling continued growth?
Dan Schulman: I think there are two meta-trends that are inexorable and are continuing to accelerate. Firstly, currencies of all kinds are digitising. Cheques are disappearing, and although 85% of the world’s transactions are still in cash the percentage of transactions that are digital is increasing, so money itself is digitising, whether that be in the forms of digitised cards, or actually digital currency itself. So you’re seeing that happening.
All of that is enabled by the explosion of mobile into the marketplace. You probably have 80% penetration of mobile right now in the world’s population, in the next five years that will move towards 90%. And you have two trends that come with mobile. The first with consumers is that you have all of the power of a bank branch in the palm of your hand. So basic consumer transactions can be done quickly, they’re simple and easy to understand, they’re more secure than money, and they are much less expensive. The digital world can be 80-90% less expensive to serve a customer than traditional bank branches. And so you’re going to have an explosion of traditional platforms that manage and move money for consumers.
On the retail side, retail is going through a fundamental transformation due to mobile as well. There used to be distinct worlds of online and offline retail, mobile is blurring the distinction. If you make a purchase using your mobile and pick it up in the store is that online or offline? It’s a combination that’s just commerce. And more and more retailers are looking at what Amazon and others are doing and asking themselves how they can compete, how they can use the mobile phone to become more intimate with the customer, and digital payments is a key driver of that, integrating rewards as a currency type etc.
So those secular trends are driving growth in all regions at 20% easily throughout the world and we only see these continuing to accelerate.
Eric, are those the same trends that are driving Alipay’s growth. Or do you see something different in Asia?
Eric Jing: In China there was a county which is located under Mount Everest, very far away, with a very small population. To make a payment there was such a challenge, you had to walk tens of miles to buy something. If you wanted to make a transfer to someone you had to go very far to find a branch of a bank to be able to do that. But today, by having mobile phones, it’s so much easier for those people to buy something through their mobile phone, and make a money transfer through apps, it has really improved their lives.
To me there are two big trends we will see with the next generation of financial systems. The first is that more mobile technology needs to be applied to this sector. We know that mobile technology helps us to increase reach, so by extending this we can reach out to millions of people in a cost effective way.
Also people are talking about how cloud computing can bring down processing costs dramatically. With cloud computing in place it will give us the capability to launch new products in a very short period of time. And by having big data it increases your capability to manage risk. These technologies could be applied in this sector to reshape and redefine products, but today we are also seeing AI research, and how biometrics will be used to administer KYC or to protect your account. So this is how new research and technology will be applied increasingly into this sector to really innovate.
The second trend of new financial systems is that these systems will be more inclusive, focusing on the underserved or unserved, including SMEs. This is because previously in the traditional banking model it was very hard for institutions to offer appropriate products for this group in a sustainable way. But today it is different, we can bring financial service products to underserved people, and bring equality to them and improve their lives.
Right now, over a third of our 450 million users in China are from rural areas. In Tibet, over 90% of all electronic payments are done via mobile, so by having this attitude to technology we can really bridge the gap to these people.
Dan Schulman and Eric Jing were speaking at The Global Fintech Revolution conference at Davos 2017
To read part two of our Davos 2017 Global Fintech Revolution coverage click here