Wednesday, 25 May 2016 21:25

'Concerted effort' needed for Fintech sector to reach innovation pinnacle

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'Concerted effort' needed for Fintech sector to reach innovation pinnacle Image courtesy of Stuart Miles, freedigitalphotos.net/images

Australia has a bright future as a leader in Fintech innovation but to reach that leadership position requires concerted effort from government agencies and established financial institutions, as well as partnerships and research collaboration between banks and start-ups, according to global research company, Frost & Sullivan.

In its positive outlook for the Fintech sector, Frost & Sullivan says that Australian Fintech opens up vast opportunities for ICT companies in security, cloud, managed services, blockchains, artificial intelligence, biometrics and data centres.

And, according to the firm, data and connection security will be the most significant challenge for Fintech companies in Australia, largely because mobile payments make up the majority of the revenues of all Fintech segments.

Saranga Sudarshan, research analyst, ICT Practice, Frost & Sullivan Australia & New Zealand, cautions that reliable security will be a key issue and an important selling point to ensure success, “as this will allow Fintechs to build consumer trust in order to grow and compete with established institutions”.

Sudarshan suggests that Australian Fintechs need to partner and collaborate with security vendors and ICT companies to improve the security and connectivity of increasingly mobile-centric financial services and to protect a user’s financial data.

Frost & Sullivan’s study also highlights the fact that as Fintech success depends on security vendors, many ICT and telecommunications opportunities will be security-focussed.

And, the research firm says that APAC revenues for cyber security in the banking and finance security technology market are expected to grow at a CAGR of 7.31% over the forecast period of 2015-2020.

“Established institutions already have large security expenditures, with security systems and protocols built over many years,” Sudarshan says.

“Attacks against these institutions are highly unlikely and more unlikely to be successful. However, the sensitivity of financial data, unlike any other kind of personal data, will mean security will be a concern at every other stage of a product’s delivery chain.

“End-user attacks are the highest priority given that the decentralisation of personal smart devices, whether they are wearables, smartphones or personal computers, will make storage of end-user credentials the most vulnerable to security attacks. Uniform security protocols will not be implemented without significant standardisation of operating systems and version updates.”

According to Frost & Sullivan, biometric security will be the future of mobile security and Fintechs will drive the expansion of biometric security.

Explaining that biometric security protects an individual’s financial data and reduces vulnerability to cyber fraud or physical fraud as well as weak or misplaced passwords, Frost & Sullivan says that biometric security will make the user themselves “the strongest element in a security measure”.

And, the research firm anticipates that biometric authentication will be the future of mobile security, with extensive biometric security features developed or announced for implementation in all new smartphones over the next 18 months.

Audrey William, head of research, ICT Practice, Frost & Sullivan Australia & New Zealand, says blockchain development for financial services has attracted various ICT companies to develop blockchains with different revenue models.

He says some companies have opted for a blockchain-as-a-service model, while others have opted to sell cryptocurrencies.

“ICT companies involved in blockchain development include Ripple Labs with their direct partnerships with international banks, and their Interledger project, Microsoft and Ethereum with their EthBaaS, or Blockchain-as-a-Service product, IBM working with Digital Asset Holdings, to develop Business Logic Engines to embed blockchain technology into a business’s exiting transaction systems – and Intel is developing blockchain technology with internal trials for the benefit of the Hyperledger Project.”

William cites analytics as one example of a software suite that is available to Fintechs and established financial institutions.

“The cloud computing capability of Watson Analytics presents a possible model for other AI platforms aimed at the financial services sector. AI hardware architecture is the foundation for customised AI software, and Facebook’s Big Sur is an example of an AI hardware architecture that allows Fintechs and established financial institutions to build their own AI systems.

“Customised AI systems would allow a range of AI solutions to compete in a market of 'off-the-shelf' AI analytic packages.”

According to William, data centre requirements will be unique for Fintech, and there will be huge opportunities for data centre providers offering tailored co-location services, managed hosting services and cloud storage.

He points to the fact that the rapid growth of Fintech companies offering personal and business finance will present opportunities for both wholesale and specialist data centre providers.

“Telecommunications companies and system integrators have the opportunity to offer managed services across security, cloud, data centre in areas such as digital payments, blockchains, biometrics and artificial intelligence.”


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Peter Dinham

Peter Dinham - retired and is a "volunteer" writer for iTWire. He is a veteran journalist and corporate communications consultant. He has worked as a journalist in all forms of media – newspapers/magazines, radio, television, press agency and now, online – including with the Canberra Times, The Examiner (Tasmania), the ABC and AAP-Reuters. As a freelance journalist he also had articles published in Australian and overseas magazines. He worked in the corporate communications/public relations sector, in-house with an airline, and as a senior executive in Australia of the world’s largest communications consultancy, Burson-Marsteller. He also ran his own communications consultancy and was a co-founder in Australia of the global photographic agency, the Image Bank (now Getty Images).

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