Introduction

The globalization of financial service can be seen as the integration of the nation’s financial system with international financial markets and institutions (REF), it requires that the nation or regional government to liberalizes the financial and capital market sector. Especially, past World War II, the movement of financial globalisation was mainly impelled by the Western or developed countries, with their active participants in the financial globalization process, whereas the remaining developing countries jumped on the financial globalisation train at a much later time, which happened approximately around the early 1980s  and started to participate in the process of financial globalisation (REF).

With the emergences of financial globalization, the general goal for most financial institutions was to evolve from traditional banking business  (REF) and to tap into the global financial service sector and to gain and obtain a greater competitive advantage through cultivating strategic alliances and partnerships with other financial and non-financial service institutions, so as to provide a more diverse financial goods and services to consumers. Particularly, the advancement of internet technology has shifted the global financial services industry approach, scope and competitive landscape and at the same time the move of most developed nations to privatize and to deregulate their financial sector, to provide a unique mix of customer segments and to becoming more customer-focused. The globalisation of the financial service sector is not a new phoneme (REF), however, today’s global financial interconnection and depth dependencies have made the majority of the financial service institutions to be more flexible in terms of innovation and technology (REF).

As the financial service has gone through a tremendous change from local banking towards a more global presence and due to the technology advancement, customers demands and needs has evolved at the same pace. In the late 1970s and the early 1980s that are seen by many as the golden age of the modern investment banking (Di Muzio 2014), many financial service institutions started to invest heavily into the revolutionary technologies. These steep development reached its heights during the Dot-Com era, where firms like Google, eBay, Paypal or Amazon managed to outlive the Dot-Com Bubble (ref) to become nowadays an absolute market leader in their industry and other like Pets.com or Broadcast.com did not survive the bubble and were labelled as a total flop.

The traditional banking business has always been a key component in the financial service sector, however, the swift development of technology around the world has changed the economic and financial service industry. As Zavolokina et al. (2016) have pointed-out that the traditionally known financial service and capital market is rapidly disrupted and transformed by the phenomenon of Financial Technology or for short FinTech (Schueffel 2016) and Lee (2015) describes FinTech in his report as the amalgamation of overall financial goods and services available to end consumers through new technological innovation and digital solution. Not only has the new disrupted innovated FinTech has changed and at the same time created numerous new business models, but also it has changed the customer’s needs and demands (Zavolokina et al. 2016). These visible changes have changed and disturbed various forms of the finance, capital and economies such as the banking and financial regulations, investment and banking industry and payment and transaction services (Accenture 2015).

Although technology has been one of the cornerstone’s of the financial service sector, it was only after the financial crisis that altered the mindset and laid down the foundations for the future of the FinTech (ref). Arner et al. (2016) suggested that the root and cause of the recent Global Financial Crisis, could be traced to the financial infrastructural and regulatory inefficiency and market failure and a new approach was more than needed as a new channel that needs to have the capabilities to fill the gap in the financial service market. The increasing interconnection of Internet and Personal Computer (PC) not only in the operations of various financial and non-financial business but at the same time, for the general public, has created new electrical services that have the power to reduce the disparity between the financial service sector and the customer’s needs (PwC 2016). These new types of solutions are tailored to be used with ease (PwC 2016) by the end customers and at the same time to use the highest level of technology and digital transaction speed and are less centralised in their business models that allows them to work more independently from the larger multi national corporate financial service enterprises.

Since the 1980s, where the first banks started to introduce digital based service over the Internet to their customers (Allen et al. 2002), the financial service sector has continuously undergone a digitised transformation (Deloitte 2016), from the online payment gateway Paypal to the decentralised online cryptocurrency BitCoin (González 2004), the new era of online based financial service has just begun. The rise of FinTech has facilitated emerging firms such as FinTech start-ups (Ref) to provide an alternatives forms of services to the overall public in the fields of payments, borrowing and lending, investment and most important security in financial transactions.

In this part of the Literature Review we will outline the current researches, reports and academic literature on Financial Technology. For the Purpose of common understanding, we will refer to Financial Technology as FinTech.

Literature Review of FinTech

Why FinTech

The year 2016, can be said was the year of uncertainties. First, with the Brexit referendum of United Kingdom (UK) perminantly leaving the European Union (EU) and second, the election of the Donald Trump as the President of the United Stated (US), has created a event of fragility. Although the election of Trump has pushed the NYSE and NASDAQ to record high returns (Authers et al. 2016), other variables have formed a more unease prediction for the Financial Service sector and alternatives to the traditional finance was needed. Undoubtably FinTech had an unbelievable glodrush vibe over the past 5 years (ref). With year after year, where Venture Capital (VC), Private Equity (PE) and also through Merger & Acquisition (M&A), new investment has been put in new promising and emerging technology in Finance. In 2015, it was the peak of the FinTech hype with a total annual global investment of over $47 Billion (KPMG 2017) in Fintech companies, which was an increase of over $18 Billion to 2014 (Vucicevic 2017 and KPMG 2017). Graph 1 below illustrates the annual global investment in FinTech between 2010 and 2016, where a clear trend in FinTech investment can be observed from 2012 to 2015.

Nontheless, 2016 was a demanding and difficult for the global investment in FinTech sector. As mentioned earlier, the uncertainty of the Brexit vote outcomes and the impact of the negotiation between the UK and the EU, has caused many global FinTech investors to switch into a caution mode and awaite the results of the negotiation. The first signs of these uncertainties has surfaced, where almost one year after the Brexit referendum vote, many major Financial Service organisation has decided to relocate their operation from London (which is or was the global financial service hube), to other European Cities. With This in mind, many FinTech start-ups or companies will most likely follow the same trend.

Another worrying event in 2016 was the US presidential election of Donald Trump. Although many expert believed that the newly elected US president would have a negative impact on the US economy, quite the contray happened. The NYSE and NASDAQ gained all time record profit, but on the other hand the market volatility has increased by over 10% at the same time, where it reflects a greater uncertainty of the overall market.

The KPMG (2017) report shows that the global FinTech sector is recovering steady from the 2016 shocks (ref). At the same time the recsent FinTech trends as illustrated in the KPMG report (2017) that in 2017 there will be more confidence from VC and PE to invest in FinTech again. Nonetheless, many eyes are currently focused on the US adminstration, as it plans to put a more stricter restrictions on the skilled foreign labour. These expertise are desperatly needed in the FinTech hubs such as New York (with its sheer concentration of financial service institutions and especilly Wallstreet (Ref)) and Silicon Vally (the epicenter of the global tech movement). Many FinTech firms are aiming for a more easygoing approach from the US administration, with the hope that it could boost talented and skilled workers in the area of FinTech. Another major FinTech hube is London (ref) and with the UK government’s “devorce strategy” (wired 2017) of an “Hard Brexit” (wired 2017), the free movement of labour could could be put on halt from March 2019 onwards and many UK based FinTech companies would lose out their “passorting right” (wired 2017) to operate within the EU and various FinTech companies could rethink their UK operations and could decide to relocate their operations to other EU member states.

As there are other macro or external events that could potnetially have either positive and negativ impact on the FinTech development, nevertheless, the current advancement of the FinTech phenomenon has a resembling corallation with the Dot-Com boom era of the late 1990s (ref). Especially when comparing FinTech with Dot-Com companies, a similiarity is that both had a high growth of firms entering the market and being valued in billions (ref). However, since the Dot-Com bubble various variable have change, so as to avoid another “tech bubble” (ref). For one firms that aim to go publich through IPO need to have at least $100 million in annual revenue (ref). Another point it that many FinTech do not intend to reinvent the wheel again, whereas the majority of FinTech companies are focused to find new and unorthodox solutions for existing issues and problems in the financial service sector from a technological viewpoint (ref).

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