Fintech is a cross-disciplinary subject that combines Finance with information technology and innovation management. It’s a rapidly emerging field that has changed the business landscape completely.
Although it is a hot topic these days, Fintech is a pretty old concept that dates back to the year 1958. Back then, transmission cables were used to deliver messages, and offer financial services for the facilitation of global telex.
Fintech has come a long way since then, but its core objective has always remained the same — to enable the development of enabling technologies.
Drivers of Innovation
When it comes to Fintech, there are various factors that come at play. These include:
Fintech relies heavily on emerging technology such as artificial intelligence, blockchain, and cloud computing. AI helps improve the precision level in the industry, along with enhancing customer engagement level. It also helps in quickly resolving customer queries.
Blockchain technology is useful because it eliminates trust issues that have always existed between transacting parties. It eliminates the need for a middle man to enable faster transactions.
Blockchain also ensures security, since all users have to do, is log in once with the app. After that, subsequent logins do not require any additional information apart from a private key.
Blockchain is also internet-based. It does not need a specific set up to operate, and there is no requirement for you to register for any local regulations. In simple terms, you can transfer money to any part of the world via the internet without worrying about security using blockchain. We suggest you get yourself a high-speed internet connection such as the one offered by AT&T internet packages, as soon as possible so you don’t miss out on an amazing opportunity..
Finally, there is cloud computing. This technology incorporates virtual routers and firewalls and helps create a setup for recoveries in case of disasters. It also assists in automating the audit and check process.
An advantage of cloud computing is that it allows businesses to maintain peak performance at all times with the help of data storage and high-performance servers.
2. Consumer behavior
The modern generation is much more tech-savvy than its predecessors. Convenience is what matters to this generation, and Fintech provides them with just that.
3. Fewer Barriers to Entry
With the rapid evolution in technology, financial institutions have no other choice left but to adapt to changing times and find solutions to reach to customers. Technological advances have also made it easier for new players to enter the market.
Just consider the example of Monzo. It started as a simple idea and eventually went on to become a fully regulated band on Amazon Web services cloud. This ‘bank on your smartphone’ has already handled truncations worth billions and currently serves half a million customers in the United Kingdom.
4. Increased Access to Information
Through analytics, artificial intelligence, and cloud computing, companies have increased access to customer insights. Using this information, they can adjust and cash in on the latest trends.
The mix of technology and convenience has enabled Fintech to change the way people think about money. It has also changed the way people perceived terms such as ‘cashless economy’ and paved the way for new businesses.
Tech giants such as Amazon are also catching up with this emerging trend. The company has already taken steps to combine the experience of brick and mortar stores with online shopping by launching nine cashier-less convenience stores.
Customers go to the store, get what they need, and leave. The company charges customers automatically using their Amazon account. With this idea, Amazon is seeking to change the way we shop.
Fintech is also enabling users to make payments using their smartphones and smartwatches. We have already witnessed the success of PayPal, but new players such as Venmo, TransferWise, and Zelle have entered the market. These companies are revolutionizing the way we share money in everyday interactions.
Adding to this are crowdfunding websites such as GoFundMe. These allow users to contribute money for a cause, situation, business idea, or another person with just a few clicks.
Finally, there is Bitcoin. Digital currency is not easily understood, but experts agree that in the future, it is going to prove to be a game-changer. Bitcoins incorporate blockchain technology, and although it is not common right now, it is likely to change the way we pay, save, and borrow money in the future.
Improved Financial Services
Purists probably consider Fintech to be a disruption of the industry, but they are few and far between. The remaining players have already started incorporating technology into their operations and are transforming the industry from within.
Fintech companies like PayPal have become industry leaders with their innovative products and services. Customers naturally gravitate towards these companies because they make money management easy and efficient.
Let’s take a look at how Fintech provides improved financial services:
1. Borrowing and lending
Through Fintech, it has become easier to borrow and lend money since customers have more options available for getting funds. They can approach banks for loans and mortgages, or they can turn to crowdfunding websites and peer-to-peer lending to raise capital.
With Fintech, borrowers who are struggling to get loans from financial institutions have an alternative for borrowing money.
2. Disruption in Financial Markets
Financial markets have remained the same since the time they first came into being. That was a world without technology, and a lot has changed since then. It’s only natural that technology will leave an impact on these markets. With the help of artificial intelligence and machine learning, users can create algorithms that can predict the performance of the stock markets.
With technology like automated trading, users don’t even have to keep an eye on the stock market at all times. You can also use the technology to collect aggregate data and use it to predict future events.
3. Asset Management
Data analytics and processing tools make it for users to manage their assets. Algorithms and robot advisory programs even provide users with suggestions regarding whether an investment is worth the money or not.
One of the biggest problems that financial institutions face is credit fraud. Fraud detection has always been challenging for companies until the emergence of Regtech, technology that allows users to identify outliers in transactions and predict frauds.
With the information available at their disposal, users can minimize their risks and avoid data breaches.
Although majority of the Fintech companies focus on millennials, some companies have taken the opposite route. Companies like SilverBill work in conjunction with businesses like Eversafe to make the process of administrating senior citizen’s bill easier.
The senior citizen’s account links to the app that collects a user’s data and sends an alert if it detects something unusual.
Fintech has already penetrated our existing financial infrastructure and paved the way for innovation in the future. In the next few years, you can expect Fintech service providers to enter new markets and reach out to more customers.
Fintech’s breakthrough has been in its ability to reach to underbanked and unbanked customers, people who were reluctant to use banking services in the past. This breakthrough has been instrumental in the success of Fintech companies such as PayPal.
Geographically, Fintech’s success has been more visible in countries like China and India. In China, the ratio of mobile payments has already exceeded cash payments.
Countries like the Philippines, Indonesia, and Latin America have been unbanked for decades, but, recently they have witnessed a growth in their percentage of mobile payments in the region due to wallet innovations.
The Western world has been in charge of the financial sector for so long that it will be some time before it changes because Fintech is here to stay, and it will continue to disrupt the finance sector for years to come.
Baldwin Jackson is a successful digital marketer with expertise in search engine optimization and content marketing. The perfect balance of his analytical ability and creative thinking is what sets him apart from other practitioners in the digital marketing realm. He has helped a lot of small and medium-sized businesses in crafting their digital marketing strategies that are not only cost-effective but delivers results as well.
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