FinTech is the term used to describe the technology driving financial services innovation. Giving customers the ability to manage and control their accounts, it encourages automation and increases online sales.
FinTech is probably used every day by consumers and businesses through automated financial transactions and other technological advancements. We’ll look at how FinTech is transforming and modernising consumer and business financial resources.
What is FinTech?
FinTech is the acronym for “financial technology.” FinTech was initially perceived as a techpreneur counterculture movement meant to overthrow the rigid regulations and strong resistance to change in traditional banking and lending. It made reference to the backend procedures used by conventional banking institutions to set up their servers and software programmes. Making it simpler to send and receive money was the aim.
Nowadays, it’s more difficult to define FinTech because both its meaning and the range of available financial technology have grown. The fact that FinTech uses technology to challenge the status quo of financial services is still true.
In a nutshell, FinTech refers to companies that use technology to automate, modify, or enhance financial services for both businesses and consumers.
How is FinTech changing business?
Startups and established companies in the financial technology sector offer a wide range of technologies and services to different audiences. Although FinTech offers benefits to a wide range of customers, its tech solutions place a high priority on accessibility and speed.
What FinTech offers businesses is as follows:
- quick access to effective financial instruments. FinTech is an equaliser, giving companies of all sizes and in all sectors instant access to powerful financial tools. Big data, mobile connectivity, and fast, always-on internet connections allow businesses to quickly access sophisticated, feature-rich financial software suites and managed services. Previously, such setups would have required spending millions of dollars on fees, supplies, permits, trained personnel, and IT teams.
- exceptional business insights. Smart information displays with real-time updates and data analytics have been developed by fintech. Business leaders have access to unrivalled business insights thanks to this information. They can adjust their marketing on the fly to benefit from advantageous circumstances or switch to a new strategy.
- accessibility and comfort for the consumer. FinTech products assist businesses in giving their customers new access. Businesses can offer customers user-friendly software, satisfying user interactions, quick internet bandwidth, and more. On computers or mobile devices, customers can access financial data and transactions in real-time. Peer-to-peer payments, mobile banking, peer-to-peer payments, and even new methods of evaluating credit applications have all been sparked by these innovations.
What industries are being disrupted by FinTech today?
Industries like cryptocurrency, wealth management, and payment processing are being transformed by today’s FinTech players. Here’s a look at how companies are enhancing and fine-tuning their offerings to better serve customers using fintech.
1. FinTech is revolutionizing payment processing.
A key focus of FinTech has long been payment processing. Consumers desire the highest levels of security while still requiring the utmost simplicity in transactions. Modern financial technology is used by the best payment processing businesses to ensure that transactions are safe and easy.
Here are a few instances:
- Square. Possibly the most well-known FinTech company today is Square. With the invention of its cutting-edge smartphone card-swiper technology, Square made mobile payments commonplace. To find out more about the financial technology that powers Square, read our in-depth review.
- Stripe. Apple Pay’s authorised mobile payment partner is Stripe. It is also a pioneer in app-based and mobile-optimized checkout systems. Millions of customers can now use Face ID or Touch ID on their phones to make purchases on a variety of apps and mobile websites thanks to Stripe’s technology, which integrates with Apple’s iOS-based biometric security and digital wallet technology. Read our review of Stripe to find out why we believe it to be the best option for processing online payments.
- Payfirma. Payfirma was the first business to introduce mobile smartphone card reader technology to Canada in 2011. Since then, the company has grown to become a leading provider of omnichannel merchant account services, assisting companies in accepting credit and debit cards in person, online, and via mobile devices.
2. FinTech is disrupting alternative lending.
Alternative lending services offer fresh perspectives on personal loans, expanding access to lending options and facilitating application processes more quickly and easily than conventional financial institutions can.
Here are a few instances of alternative lenders that are FinTech-driven:
- Prosper. Prosper was the first marketplace for peer-to-peer lending when it was introduced in 2005. It has endured numerous adjustments and industry regulations to develop into a reputable alternative lender.
- LendingClub. In 2006, LendingClub debuted right after Prosper. Like Prosper, LendingClub started out as a marketplace for peer-to-peer lending and went through many of the same struggles with industry regulation. The largest market of its kind is now there.
- Upstart. A distinctive personal loan company called Upstart was established by former Google employees. To provide a more accurate lending rate, it also takes into account your educational background and employment history in addition to your credit score. As a result, it opens up lending opportunities to a wider audience than traditional services.
3. FinTech is making its mark on wealth management and automated investing services.
Robo advisors, also known as automated investing services, eliminate the pricey human advisor component by using machine learning algorithms and enormous amounts of data.
Here are two illustrations:
- Betterment. Betterment, one of the first automated investment services, provides a website with a simple, transparent process to assist new investors in starting their journey to financial security. Betterment offers no minimum balance requirements and low fees.
- Wealthfront. Wealthfront has a $500 minimum but no fees for the first $10,000 managed, in contrast to Betterment. It’s a compelling offer for novice investors.
4. FinTech is fueling cryptocurrency.
These two services are among the oldest, despite the fact that many rival FinTech-driven cryptocurrency exchanges would be happy to accept your money. They stand out from the crowd due to their characteristics.
- Kraken. Kraken is a feature-rich cryptocurrency trading platform that combines standard exchange features with trading and management similar to forex. Additionally, Kraken is renowned for having some of the industry’s strictest security measures and is one of the few exchanges to operate a “dark pool.” The first Bitcoin exchange to pass a cryptographically verifiable proof-of-reserves audit was Kraken. It was also the first to have trading price and volume displayed on the Bloomberg Terminal.
- Coinbase. Coinbase is a cryptocurrency exchange and all-inclusive digital wallet, often referred to as the PayPal of Bitcoin. The most well-known method of purchasing and selling Bitcoin in the world, according to Coinbase. In just 2020, it exchanged more than $195 billion in digital currency.
The future of FinTech
What the future of fintech holds is a question that many investors ask. Former Payfirma president and current COO Kalle Radage predicts FinTech startups will keep looking for ways to simplify digital payments. “Frictionless payments and banking mean faster growth for businesses and better experiences for consumers,” he declared.
Easy money transfers are a byproduct of fintech innovation and have served as inspiration for many fintech startups. For instance, Bill Clerico started the online payment service provider WePay to make it easier for friends to transfer money to one another. And Venmo, a hugely well-liked social payments app (and its Venmo for Business business-focused offering), shows how open people are to simple ways to transfer money.
Another FinTech field with growth potential is blockchain technology. Blockchain offers a decentralised, more open, and secure way to track the transfer of money and other assets, such as diamonds, supply chain items, and car titles.
In addition, there will be more opportunities for businesses to interact directly with consumers, faster and more affordable financial services, and virtual banking and business transactions.
