Consider your pre-Covid-19 life for a moment. In the days before social media, fintech was the unsung hero of your Friday night.
You deposit your paycheck by taking a picture with your phone and uploading it to your bank’s mobile app. You went to Mint to figure out your monthly entertainment budget.
You and your friend split the bill at dinner using Venmo and later paid for a drink with your phone at the bar. When it was time to go home, you took an Uber and paid with a stored credit card.
Fintech is probably a big part of your personal and professional life right now. From Ernst & Young’s Global FinTech Adoption Index, nearly two-thirds (64%) of the global population used fintech applications in 2019. This was up from 16% in 2015.
According to the report, three out of every four consumers have used money transfer and payment solutions.
So, what is Fintech?
What is Fintech?
Fintech is a shortened form for “financial technology.
Fintech is an umbrella term for software, mobile applications, and other technologies. They are designed to improve and automate traditional forms of finance for both businesses and consumers. FinTech can range from simple mobile payment apps to complex blockchain networks housing encrypted transactions.
A “fintech company” is any company that uses technology to modify, improve, or automate financial services for businesses or consumers.
Some examples include:
- Mobile banking
- Peer-to-peer payment services, e.g., Venmo, CashApp
- Automated portfolio managers, e.g., Wealthfront, Betterment
- Trading platforms such as Robinhood
- It can also be applied to the creation and trading of cryptocurrencies, e.g., Bitcoin, Dogecoin, and Ether.
The annual Forbes Fintech 50 lists the hottest and largest companies in the industry. Stripe, a decade-old payment processor with a $95 billion valuation, tops the list for 2022. Klarna, a Swedish company that offers consumers financing for purchases at many major retailers, comes in second place. Klarna is valued at $46 billion.
Categories of fintech companies
The following are some of the main categories of fintech companies.
- Digital Share Broker
- Cross-border Payments
- Digital Operating Platform
- Online Payment Processing
- Savings and Budgeting Apps
- Peer-to-peer lending Solutions
- Fraud Analysis Software
How does fintech work?
Fintech gives people and businesses access to traditional financial services in novel ways that were previously unavailable.
For example, many traditional banks’ mobile apps now provide customers with on-the-go access to bank services. These services include viewing your balance, transferring funds, or depositing a check. Meanwhile, Robo-advisors like Betterment are less expensive and more convenient than in-person financial advisor investment advice.
Many services used by businesses, such as loan underwriting and real estate appraisals, are also automated by fintech.
Artificial intelligence combined with massive amounts of consumer data assists fintech companies in:
- Understanding their customers and powering marketing campaigns
- Product development and underwriting.
Fintech has evolved in response to developments in the broader technology sector.
Several dominant trends defined this growth in 2022:
The use of digital banking is expanding. Digital banking is now more accessible than ever before.
Many consumers already manage their money, request and pay loans, trade currencies online and buy insurance through digital-first banks.
The worldwide digital banking platform market is projected to grow at a compound annual growth rate of 11.5% by 2026. This is because of its simplicity and convenience.
Blockchain technology enables decentralized transactions without the involvement of a government entity or another third-party organization.
For years, blockchain technology and applications have grown rapidly. This trend will continue as more industries turn to advanced data encryption.
Artificial Intelligence (AI) and Machine Learning (ML)
AI and machine learning technologies have changed the way fintech companies scale, redefining the services they provide to customers. AI and machine learning can reduce operational costs, increase client value, and detect fraud.
As these technologies become more affordable and accessible, they will play an increasingly important role in the continued evolution of fintech, particularly as more brick-and-mortar banks go digital.
Benefits of Fintech
Customer services and revenue
Fintech improves traditional financial institutions’ quality by increasing efficiency and productivity.
As banks and credit unions view fintech companies as partners rather than vendors, more opportunities emerge.
Furthermore, by providing better and more modern services, firms’ client retention rates are bound to rise, resulting in higher revenues.
By integrating bank account cards and customer ids, the combination of physical and digital payments has been brought into a consolidated platform via fintech. The main benefit of businesses is that they provide convenient transaction options on a limited budget.
These technologies enable businesses to send and receive money from their accounts in different currencies without incurring high conversion fees. The power of financial technology is convenience rather than cost.
Fintech software in businesses provides the most convenient way to run a banking operation. Businesses are adopting fintech because it uses technology to provide users with a better and more reliable customer experience.
Blockchain, AI, machine learning, and other financial technologies are enhancing financial businesses and will benefit them in the long run.
Fintech has simplified many financial processes and businesses by putting convenience at their fingertips.
Applying for a loan online must be approved by digital-only lenders capable of providing same-day funding. This is only possible due to Fintech innovation.
If you need a short-term or payday loan, fintech can help. You can easily find many lenders online and get quick service. Traditional banks may not have the same advantage, and it may take months for them to complete the task quickly.
Fintech is a smart, efficient, convenient, and quick way, which is why most businesses prefer it.
Fintech is known for increasing process efficiency. You are already efficient when you use financial technology because it provides extremely specific services.
Because automation does not involve humans, it allows for a high level of specialization. As a result, it is highly efficient and provides high-quality service.
Fintech enables you to invest in solutions for a variety of reasons. However, the end result is consistent. That is increased efficiency and time management.
Throughout this blog, we learned about how fintech works and how it differs from the traditional banking sector.
Fintech has made international expansion much easier for all types of traditional firms and merchants. Consumers are also relieved that the benefits of fintech are now at their fingertips.
Experts will surround you, offering high-performing fintech solutions with equal enthusiasm and commitment to helping your business reach new heights.