Project finance experts collaborating with digital scientists and fintech entrepreneurs can drum up Infrafintech solutions to address infrastructure financing demands.
InfraFintech is a briefcase of “Infrastructure Financial Technology,” a derivative of Fintech. Fintech is an ancient technology that operates at the crosswalk of financial service and technology. The global financial crisis, portability of communication devices, and availability of the internet place an old technology on steroids. Fintech is a comprehensive acronym for software applications for computer and mobile platforms to enhance, streamline, and digitize traditional financial services.
Branches of Fintech
Fintech improves mobile payments, money transfers, loans, and asset management processes. Fintech branches off into several granular industries: wealthtech (apps like Wealthsimple, an online investment management service), investtech (like Acorns, which lets users round purchases up to the nearest dollar, investing the change in a diversified portfolio), insurtech (such as Next Insurance, a mobile-first carrier), Paytech (Visa, Flutterwave, Paystck, Interswitch which enable payments processing, e-commerce transactions, accounting and, more recently government assistance programs like the Payroll Protection Program (PPP). (Walden, 2020)
"Blockchain application in fintech provides new opportunities for financial innovation and efficiencies."
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Fintech and InfraFintech
Fintech has significantly enabled and disrupted nearly all aspects of financial services. However, the impact rate of fintech on infrastructure financing has been slow, but that is changing because of the integration of Fintech and Blockchain technology. Blockchain application in fintech provides new opportunities for financial innovation and efficiency. Fintech and blockchain technology integration can pave the way to wholly democratized finance.
Features of Blockchain
There are many features that make blockchain technology stand out, especially the use of smart contracts. Different from traditional contracts, smart contracts are self-executable and self-verifiable contracts. Smart contract implementation is one of the factors that will disrupt the infrastructure sector that operates on a contractual basis. Blockchain is a good fit for fintech to improve operational efficiency in InfraFintech and other financing services.
"Fintech and blockchain technology integration has the potential to pave the way to wholly democratized finance."
The Future of InfraFintech
InfraFintech can eliminate the issue of trust between two transacting parties operating on equal terms by harnessing the benefit of blockchain technology. Blockchain can create an InfraFintech spiral that completely revamps infrastructure financing transactions that require no intermediary, peer-to-peer networks, lightning-fast transactions, and total transparency when well implemented. (Vuckovic, 2021). The core challenge of infrastructure financing is the failure rate of projects under development to reach the financial close, more extended time of completion, and projects over budget caused by many factors, including low digitization of the construction industry, government regulations, and risks. Up to 85% of projects fail before developments are complete, large projects take up to 20% longer than scheduled, and up to 80% over budget.
"Blockchain can create an Infrafintech spiral that completely revamps infrastructure financing transactions that require no intermediary, peer-to-peer networks, lightning-fast transactions, and total transparency when well implemented."
With Project finance practitioners working closely with the government, digital innovators, data scientists, and project stakeholders, solutions can be developed to speed up the implementation of InfraFintech. These services can be geared towards (i) General project transaction advisory, (ii) project bankability advisory, (iii) Effective risk-allocation policies, (iv) Public and private infrastructure-related revenue optimization, (v) Prioritization of project pipeline (vi) Capital recycling planning and execution (vii) Collateral optimization, arrangement, and Perfection, (viii)Capital markets solutions, and (ix)Tailored financing solutions.
Conclusion
Innovations in InfraFintech will be the most critical enabler for meeting the ever-increasing global infrastructure financing requirement. Emerging digital technologies in artificial intelligence, machine learning language, blockchain, crowdfunding, and asset tokenization technologies can be integrated into existing financing models to deliver innovative project funding, risk management, project monitoring, and execution, from ideation to cash flow guarantees. Project finance practitioners and financial engineers collaborating with digital scientists and fintech entrepreneurs can drum up InfraFintech solutions to address infrastructure financing demands.