Emergence of FinTech and the LASIC Principles

• Main Authors: LEE, David K. C., TEO, Ernie G. S.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2015
• Subjects: FinTech; LASIC; Alibaba; M-PESA; Financial Inclusion; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/5072; https://ink.library.smu.edu.sg/context/lkcsb_research/article/6071/viewcontent/EmergenceFinTechLASICPrinciples_PP_2015Sep.pdf
• Institution: Singapore Management University

Financial technology (FinTech) has been receiving much attention lately. For instance, global investments in FinTech ventures (covering sectors from remittances, loans to payments) have grown 3 times from US$ 4.05 billion in 2013 to US$ 12.21 billion in 2014 (Accenture, 2015). Although the development of FinTech is still in early stages, they will define and shape the future of the financial industry. Even though there are large amounts of funds entering the market, not all FinTech ventures will be successful; various factors (both internal and external) are crucial. We identify some of these factors which we term the LASIC (Low margin, Asset light, Scalable, Innovative, and Compliance easy) principles. We start by explaining the LASIC principles and then use them to discuss two examples of successful FinTech firms (Alibaba and M-PESA). FinTech will bring about lower business costs and profit margins; we will also discuss the benefits of investing for financial inclusion in the final section of this paper. In order to remain sustainable and profitable, enterprises will need to expand their business by embracing financial inclusion. There is an estimated 38% of the world population that has no formal bank accounts and another 40% that is underserved by banks, providing a huge potential market for financial institutions.