What Is Financial Technology – Fintech?

If you have ever paid for something with your phone, transferred money using a mobile application or checked your bank statement online, then you are already a part of the multi-billion dollar industry. It is called Fintech, and it is changing economies all around the world. Financial technology or Fintech helps people to improve and automate their experience from financial services via using cutting-edge technologies. To clarify, the term Fintech includes a huge range of products, technologies and business models that are changing the financial services and banking industry. It refers to several services and sectors such as:

  • Cashless payment
  • Crowdfunding platforms
  • Robo-advisor
  • Virtual currencies

Financial technology usage

​​​At its core, financial technology allows companies, business owners and consumers to manage their banking and financial operations better by utilizing specialized software and algorithms that are used on computers and smartphones.

Related post: How Mobile Apps Have Changed People’s Lives

When Fintech emerged in the 21st Century, the whole subject has known as a system and service that only financial institutions were able to use. ​Since then, however, these institutions have tried to bring really interesting features for their customers and encourage them to do the operations online. So, a more consumer-oriented definition has shaped.

What are the benefits of Fintech?

As more and more Fintech attract global attention, it is supreme that both individuals and businesses understand how this industry can make thing easier for them. Statistics show one out of every three people across 20 major economies report, using at least one Fintech related services in the last six months. Below we have tried to highlight some profits of this industry and prove our reasons why Fintechs are reaching to more popularity over old financial service providers:

Flexible Fintech regulation

Fintech companies are making an effort to present solutions that are efficient and effective at a lower price which will be really great for small businesses. It can also provide them suitable cash flow, better working capital management, and more stable funding. The first policy that every innovative Fintech products try to apply is responding as quickly as possible to client needs. In one hand, traditional banks and PSPs always struggle to prepare client requests as quickly as possible. The reason is the lack of flexibility in legacy systems, decision processes, and complicated bureaucracies. On the other hand, Fintechs are very flexible for the following reasons:

  • Firstly, Fintech startups are typically smaller and younger in comparison with banks and other financial institutes.
  •  Secondly, Fintechs mostly use API (Application Program Interface) based systems; Utilizing this method, can help them to collaborate with other service providers in a quicker and more comfortable way.

Transparent pricing

Fintechs make it possible for their customers to maintain financial services in a very transparent way through better pricing system. Customers can be aware of any costs and don not have to pay hidden fees. There is also a lot of options that users can choose from. It means many Fintech companies offer a pay-as-you-go pricing model to make their costumers more comfortable. Fintechs service providers are bringing various platforms together to make a free market ecosystem that at the end helps users save money.

Fintechs are the innovators

Fintech companies are taking advantage of cutting-edge technologies as a beginning point for their innovations. By reducing information lack of symmetry in the market, Fintech is not only matching investors, lenders, and borrowers more conveniently; But providing a more level playing field for mid-market companies and retail investors to have greater participation in the market. By providing continuous innovation and increasing the understandability, clarity, and automation of cash transfers, Fintechs are becoming a pioneer in banking and payment systems by defining new standards.

Improve accessibility

Financial tech has filled a void for people around the world who struggle to have access to the old and traditional banking system. Actually, it is estimated nearly two billion people worldwide are without bank accounts. This is where Fintech could play a major role here. Thanks to Fintech, all you need is your phone or laptop to take out a loan or buy an insurance service. For example, Kenya is one of the countries which pioneered a mobile banking system called M-pesa. By using this service, Kenyans are able to access their accounts directly on digital devices. For instance, they can transfer money, pay bills or take out loans using just their mobile phones.

Fintech startups and companies

It is not just startups that are getting into Fintech. Some of the worlds the best-known mega companies from Apple to Alibaba are investing very big on it as well. They also have some Fintech products like Apple Pay and Alipay. The reason behind these investments is really simple. Users tend to do their traditional financial operations in less time. consumers are continuing to adopt Fintech very fast.

Over € 2.7 billion was invested in European Fintech companies across 104 rounds in just the first quarter of 2019. Therefore, we can expect that this year will be another year in which the Fintech sector gains the attention of both media and investors. Also, global investment in the Fintech sector has spent about $100 billion since 2010. In 2017 alone, Fintech investment jumped 18%.

Fintech growth

Industry challenges

Like other growing industry, financial technology is not without risk. Most importantly, it is obvious that regulators and governments have struggled to keep up with the fast pace of innovation. Data privacy is another major concern for customers. As more financial services become digital, cyber-attacks become a bigger risk. In conclusion, Fintech is a big opportunity for both investors and customers.

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