Even though it sounds very promising, I should declare this first.
“There is no easy way of making a million!”
If you work hard and save up 800 USD a month for the next 20 years, it will take 52 years to make a million, assuming that you can receive 4% fixed return a year. You hear it right, it’s 52 years!
Not an attractive plan at all! (Only your kids will be happy to get a house with that million!)
But the fact is that it is still possible for everyone to achieve a million.
Power of Compounding
Any healthy person in his/her 20’s, 30’s or even in early 40’s, who works hard in any given job and save up for the next 20 to 30 years, he/she will be able to plan to retire as a millionaire just by making use of the power of compounding.
This is the only way to make a million with a regular salaried income without taking too much risk.
Given that we are now in the generation where the average lifespan is over 80 years, it is important for everyone to have some form of basic medical insurance and retirement pension plan.
‘Fintech’ to accelerate your millionaire plan
These days, ‘Fintech’ has become a trendy term, especially after the US financial crisis. Financial technology innovation and improvements have always been formed at the background, but it seems that this time, it is different as we are now observing a whole new paradigm shift in the finance industry.
Previously, large corporations/institutions and HNWIs (High Net Worth Individuals) could enjoy the luxury of specialised financial services (just for themselves) all the time. For instance, they had dedicated relationship managers, analytical tools and trading systems and so forth.
Open market, lower cost
Now, affordable Mobile and Big Data technologies are offering the infrastructure for everyone and with new economy concepts (or systems), such as Sharing Economy, they are changing the whole business world.
Now, Fintech development is helping to lower the cost of financial services and making them accessible to a wider group of consumers. Specifically, I believe that the SMEs (Small and Medium Enterprises) and Low-Medium Income Classes will benefit even more from Fintech developments than before.
Simply put, for the end-consumer, it means better access, improved services at lower cost, at your convenience.
Investment at a lower cost, higher return for investor
In Asset Management industry, it is an open secret that financial service distributors are making more money than fund managers and that the costs that the consumers are bearing are very high.
Let’s say Fintech (i.e. Robo Advisor) helps to lower the management fee by 0.5% and offers Alternative Investment opportunity (i.e. P2P Lending) to make extra 1% in return.
Now, going back to our millionaire plan, it will only take 40 years to make a million and 27 years to make USD 500K this time round. (Save up USD 800 per month for 20 years at 5.5% interest per annum.)
And when Fintech helps even further to deliver 8% a year, it only takes 30 years to make a million! (8% is not a big return in many emerging markets, even though it is in their own currencies. I still remember the time most of banks in Korea was giving 10% fixed interest when I was in Elementary School!)
More Fintech services for Asian consumers
Significant Fintech innovation have happened in the US and Europe for the last 3 to 5 years. I believe that in Asia, it will be much bigger and at a faster rate.
For one, Fintech in China has been developing well after having big changes for the last 2 to 3 years. An early fintech developer even before the term has been coined properly, Alibaba has started to offer an online payment system to people who does not even have a banking account 10 years ago.
Now, if we say that Alibaba may become the biggest financial institution in the world, no one would laugh at the idea at all.
Using China and Alibaba as case studies, I hope that it will trigger more fintech startups to sprout across Asia to develop other Asian countries and other emerging markets like Africa. I am looking forward to see Fintech innovations that can help everyone to have basic insurance and retire plans in Asian countries.