New Financial Technologies Implications on Developing Countries Paper



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New financial technologies (FinTech) such as BitCoin blockchain are disrupting financial institutions around the world. What are the implications of these financial technologies for societies in the developing world?

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Essay: Assignment 2. Written Assignment (3000 words). This assignment requires you to write an essay (not a report). Essays should be structured around a clear thesis that has been developed in response to one of the academic debates you had read about in the course of doing your literature review. Your essay should cite at least eight sources by academic authors. The best essay is typically based on extensive research that includes the consultation of scholarly sources, government reports, and documents created by private-sector organisations. You should ensure that you cite the leading experts in your field and that you consider a broad spectrum of academic opinion. Topic: New financial technologies (FinTech) such as BitCoin blockchain are disrupting financial institutions around the world. What are the implications of these financial technologies for societies in the developing world? References 18+ What kinds of Fintech are there? What are the pros and cons to developing countries? How should emerging economics use these technologies. Use examples (2-3) to analyze how developing countries be influenced. For examples online payment, P2P loans, cryptocurrency. Aker, J. C., Boumnijel, R., McClelland, A., & Tierney, N. (2011). Zap it to me: the short-term impacts of a mobile cash transfer program. Center for Global Development working paper, (268). Asongu, S. A. (2013). How has mobile phone penetration stimulated financial development in Africa?. Journal of African Business, 14(1), 7-18. Blundell-Wignall, A. (2014). The Bitcoin Question. Böhme, R., Christin, N., Edelman, B. G., & Moore, T. (2014). Bitcoin. Journal of Economic Perspectives, Forthcoming, 15-015. Brill, A., & Keene, L. (2014). Cryptocurrencies: The Next Generation of Terrorist Financing?. Defence Against Terrorism Review, 6(1). Brito, J., & Castillo, A. (2013). Bitcoin: A primer for policymakers. Mercatus Center at George Mason University. Chibba, M. (2009). Financial inclusion, poverty reduction and the millennium development goals. European Journal of Development Research, 21(2), 213-230. Choo, K. K. R. (2015). Cryptocurrency and Virtual Currency: Corruption and Money Laundering/Terrorism Financing Risks?. Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data, 283. De Filippi, P. (2014). Bitcoin: a regulatory nightmare to a libertarian dream.Internet Policy Review, 3(2). Donner, J., & Tellez, C. A. (2008). Mobile banking and economic development: Linking adoption, impact, and use. Asian journal of communication, 18(4), 318-332. Donovan, K. (2012). Mobile money for financial inclusion. Information and communication for development, 61-73. Dupas, P., Green, S., Keats, A., & Robinson, J. (2014). Challenges in banking the rural poor: Evidence from Kenya's western province. In African Successes: Modernization and Development. University of Chicago Press. King, B. (2014). Breaking Banks: The Innovators, Rogues, and Strategists Rebooting Banking. John Wiley & Sons. Kpodar, K., & Andrianaivo, M. (2011). ICT, financial inclusion, and growth evidence from African countries (No. 11-73). International Monetary Fund. Mbiti, I., & Weil, D. N. (2011). Mobile banking: The impact of M-Pesa in Kenya (No. w17129). National Bureau of Economic Research. Papadopoulos, G. (2015). Blockchain and Digital Payments: An Institutionalist Analysis of Cryptocurrencies. Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data, 153. Ponsford, M. (2015). A Comparative Analysis of Bitcoin and Other Decentralized Virtual Currencies: Legal Regulation in the People's Republic of China, Canada, and the United States. Canada, and the United States (January 22, 2015). Popper, N. (2015). Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money. Raymaekers, W. (2015). Cryptocurrency Bitcoin: Disruption, challenges and opportunities. Journal of Payments Strategy & Systems, 9(1), 30-46. Shaikh, A. A., & Karjaluoto, H. (2015). Mobile banking adoption: A literature review. Telematics and Informatics, 32(1), 129-142. Zarate, J. C. (2013). The Coming Financial Wars. Parameters, 43(4), 87.
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New financial technologies' implications on developing countries


New Financial Technologies' Implications on Developing Countries
1.0 Introduction
New financial technologies (FinTech) such as BitCoin blockchain are disrupting financial
institutions around the world. The developing countries have not been left behind as a result of
the fast-paced growth and adoption of these Fintech innovations in these economic markets. The
development of the FinTech has been adopted as a result of the key gains that these technologies
bring to the management of the different processes. FinTech plays a major role in helping
companies, business stakeholders and consumers to run the different financial operations and
processes. These technologies work through the use of specialized software, and algorithms on
computers and smartphones.
The development of the FinTech in the 21st century comes after some of these systems
were used at the back-end systems that ran established financial institutions. However, from the
year 2000, FinTech has had a more consumer-oriented definition due to the many consumer
applications that have been developed over the years. Unlike the initial days when it was limited
to the banking sector, today FinTech applications are used in diverse sectors of the economy
including education, investment management, retail banking, retail stores management, just to
mention a few (Zarate, 2013). Whereas most of the FinTech applications were initially adopted
in the west; the recent past has seen these technologies getting a high market penetration in the
developing economies. Some of the major FinTech solutions have even been developed in these
developing economies with a good case being the M-Pesa service that was developed in Kenya
and is now enrolled in many other countries in Africa and abroad.
2.0 Kinds of Fintech Applications

Different kinds of FinTech are operational today. The first kind involves the FinTech
solutions that could be classified as “Digital Payment” technologies. The digital payment
technologies are innovations that involve innovations that allow merchants and consumers to
engage in doing business over the internet (Kpodar & Andrianaivo, 2011). These technologies
would involve the use of internet advancements to facilitate merchants, consumers and other key
stakeholders to do business together without the pressure to transact physically. This kind of
FinTech innovations has increased in number in the recent past through the many businesses that
have invested in the industry (IMF, 2019). Some of the popular companies that have invested in
providing digital payment innovation services include PayPal and WorldPay. Two decades ago,
these two companies engaged in offering digital payment services allowing merchants and
consumers to transact business over the internet.
The second kind of FinTech innovation is what is referred to as Alternative Lending (P2P
Lending). P2P lending could be referred to be a service that has a focus on improving the lending
service providence by addressing some of the gaps of the global fragmented market (Kpodar &
Andrianaivo, 2011). The fragmented global lending market made it difficult for banks to lend,
especially after the financial crisis. As a result, the P2P lending service developed due to the
development of sophisticated data-driven credit models that could be applied to compete with
conventional banking and lending practices. P2P lending providers developed mobile
applications that could be installed on smartphones allowing many users of smartphones to
access easy loans that could be easily acquired as compared to the lengthy and difficult
requirements that lenders would have to certify to quality for a loan (Maumbe & Okello, 2013).
P2P lending service providers can ascertain the people to offer loans and loan amounts to offer
through the use of more sophisticated data-driven credit models that do not apply to the

traditional banks, which were the sole lenders. Today, consumers can access lending services
from P2P lenders as opposed to reaching out for help from conventional banks.
Thirdly, there is the blockchain and Distributed ledger technology (DLT) kind of FinTech
applications that have been developed to improve the efficiency of financial institutions in
serving consumers. The continued expansion in the numbers of transactions and consumers who
are served by the banking institutions put pressure on banking institutions to tap from the
blockchain and Distributed Ledger technologies (Dupas, Green, Keats & Robinson, 2014). The
Distributed ledger technology (DLT) could be defined as a digital system that is used to record
the transaction of assets by ensuring that the said transactions and their details get to be recorded
across multiple places/locations at the same time. Distributed Ledger technology is different
from the traditional ledgers that were centrally managed. One of the popular FinTech companies
that offer this service is the Ripple Company. Ripple works as a payment solution that runs a
distributed payment settlement system, which employs the blockchain and XRP ledger (Wewege
& Michael, 2019). Ripple has seen both private users, as well as, banks and organizations use the
service to settle money transfers in a faster and cheaper way as compared to the way the case was
3.0 Case studies in developing countries
FinTech innovations have been highly adopted in developing countries through different
services such as online payments, P2P lending, and running of retail banking through distributed
ledger applications. There are many examples of FinTech applications that have been
successfully enrolled in the developing countries. One such case is the M-Pesa, which is a
mobile payment and deposit service that began in Kenya but has now spread across many of the
countries in Africa such as South Africa, Uganda, Tanzania, Rwanda and some other parts of

India. This application allows for peer to peer money transfers to be done between businesses
and consumers. The application has been widely adopted in the sub-Saharan countries of Africa
with Kenya leading with an enrollment rate of over 17 million people (Donovan, 2012). The
application has had a positive adoption rate due to the convenience it provides to consumers by
facilitating faster money transfer as compared to the days where money transfer could only
happen through the bank to bank transfer. Through M-Pesa, people can send money or withdraw
from their bank accounts. The latter has made the application change the way banking is
practiced in some of the developing countries that have adopted this technology (Mehran et
Another FinTech that has been adopted in the developing countries related to the P2P
lending services offered by Tala and Branch companies. The branch is a FinTech company that
has reached to many developing countries to facilitate easy ways to access lending (Mbiti &
Weil, 2011). The branch offers loans to people using a machine algorithm that was developed by
the firm. The algorithm allows for the company to gather user data over the smartphone and use
the data to determine the creditworthiness of the applicants for the loans. People who download
the Branch app can access small to medium size loans that they could repay over time with
interest. This FinTech Company has seen more than 3 million people use their services with a
majority of the consumers being said to come from developing countries in Africa and Asia
(Abdul, 2019). On the other end, Tala, the Santa Monica, California based company has had a
good entry to developing countries through their P2P lending service. Initially launching to offer
its services in Kenya, Tala has expanded to offer online lending services to consumers in
Tanzania and parts of India. Its competitive edge is that it uses data collected to offer quick

Indeed, emerging economies are using these FinTech technologies to spur business
growth and circumnavigate the restrictions of traditional banking models. The traditional
banking models present challenges such as the long time they take to process loans and cheques
(Papadopoulos, 2015). They also present many challenges such as difficulty in offering loans to
people in the private sector whose incomes are not stable or guaranteed. The traditional banking
system also present challenges to consumers in terms of the more work that consumers have to
do to access banking services. For instance, a consumer would need to ensure the process of
making applications for loans and have to wait for the approvals before these services could be
offered. However, things changed with the advent and continued growth of the FinTech
applications in the developing economies. These FinTech solutions provided a solution to the
deepest challenges that affected the economy (Maino et al, 2019). They allowed all people to

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