The Five Ds of FinTech​

So, where does that leave us? Well, once you tie everything together, it has led many people to an increased desire for transparency and control in their lives, including goods and services. People are shifting to a machine-driven trust that doesn’t require third parties, whether a bank, government, or other potential intermediary. Some have even suggested that the rise of blockchain and cryptocurrency is closely related to people’s faith or lack thereof in government-backed institutions.

This desire for more trust, transparency, and control is summarised by what one commentator described as the, “Five Ds of FinTech”.

The first D is democratisation. From the beginning, many traditional elements of finance have only been available to the wealthy and elite. The democratisation of finance entails bringing such resources to the masses. For example, wealth management, life insurance, and the ability to borrow and lend money are some of the many services that in the past were largely unavailable to the poor. However many FinTech innovators are bringing these services to people throughout the developing world.

The second D is disaggregation. Disaggregation is a big word that basically means to divide or to break apart. Now, in the past, financial services have largely been concentrated by only a handful of entities. Leaders in FinTech have started to give customers better and quicker access to information, thus reducing costs and increasing options. An example of this would be a website like LendingTree that shows many different mortgage options so that customers can shop between different lenders.

The third D is disintermediation. Again, this is a really big word, but it really just means cutting out the middleman to save customers money and time with FinTech solutions. Peer-to-peer lending services and blockchain-based remittance services are examples of this.

Okay, so, the fourth D is decentralisation. And this focuses on the idea that a lot of FinTech solutions are not controlled by a single, central entity but instead give control and power to many players simultaneously. So, blockchain-based products are probably the best example of this. As discussed, blockchain is a distributed ledger system, meaning the data is synchronised and shared across multiple locations simultaneously.

The fifth and last D is de-biasing. Many FinTech innovators hope to remove historical bias from the financial system and to create a levelled playing field with transparent information. The belief is that financial institutions have been too exclusive and closed off, and they’re hoping that the use of technology can make finance easier to understand and accessible.

In summary, whether because this is the natural evolution of technology or the result of a backlash against banks and other large institutions, FinTech innovators are really promoting solutions that provide more transparency, more control, and more equality for consumers around the world. They want to enhance financial inclusion so that products that were previously only available to the rich and powerful can be held by everyone.

But what do you think? Is this a realistic goal? Do you think that the institutions that traditionally hold power will really allow this to occur? Or is this future inevitable? Before we can really answer those questions, it’s worth taking some time to understand who traditionally held power, specifically let’s consider who controls banking, currency and our very identities.