Wondering what is Fintech? There was a time when people had to visit the banks to apply for a brokerage account, small business credit line, or mortgage. In recent times, thanks to technological advancement, everything is changing. Financial technology (fintech) has made borrowing, saving, and investing online easy, without having to visit the bank.
In the 21st century, when the term fintech emerged, it was mostly used for the technology utilized at the back-end systems of financial institutions. Since then, the focus has been shifted to a more consumer-oriented approach.
In present times, the industries include fundraising and non-profit, educations, investment management, retail banking, and many others. In addition, the use and creation of cryptocurrencies like bitcoin are also included.
In this post, we have talked about fintech in detail. Have a look!
What is Fintech?
Financial Technology (Fintech) is a term that can be defined as advanced technology for improving and automating the use and delivery of financial services. The main purpose of fintech is to help the companies, consumers, and business owners to manage financial processes and operations through software and algorithms.
This is a broad and quickly growing industry that is serving both, businesses, and consumers. When it comes to application, fintech is commonly used in insurance, banking, investment apps, and cryptocurrency.
The companies are actively investing fintech like data science, AI, or blockchain. This is to make the financial sector fats, safe, and efficient. Without a doubt, fintech is one of the quickest growing sectors as the companies are innovating on all the areas of finance.
How Does it Work?
Many people think fintech is a new industry; well, it is just a misconception. Fintech has been around for a long time; it has just evolved rapidly. Technology has been a part of financial services for quite some time. The introduction of credit cards, electronic trading floors, ATMs, high-frequency trading, and personal finance apps.
As far as the working of fintech is concerned, it different for every project and application. In present times, the newest technology uses blockchain, machine learning algorithms, and data science. These technologies are utilized for running hedge funds or processing credit risks.
Uses of Fintech
As mentioned above, fintech is used in a wide range of industries. Here are some of the industries in which it is mostly used.
Investment and Savings
Thanks to fintech, there is an increase in the number of savings and investing apps. This has caused to eliminate barriers of investment. There are different types of investment and savings apps, they use a combination of easy investing and savings for the introduction of consumers to the market.
Blockchain and Cryptocurrency
Cryptocurrency and blockchain are separate technologies; yet, they can work together with fintech to provide new types of financial services.
Payments
Fintech is great at moving money easily with the introduction of mobile platforms like Venmo. Such payment companies have changed the way we do business. Now, it is extremely easy to send money to anyone anywhere in the world.
Trading and Machine Learning
Predicting where the market is headed is crucial in finance. Without a doubt, in the finance market, billions of dollars are to be made. This is the reason why machine learning has a critical role in fintech. Through AI subset, huge amounts of data are run through algorithms that are created for anticipating risks and trends.
Insurance
Insurance is rapidly growing and emerging as its own industry. Still, it is part of fintech, although it is slowing integrating the technology. There are numerous fintech companies that are working with the insurance companies for the automation of processes. They also aim at expanding coverage for the customers.
Lending
With the help of fintech, credit is overhauled through speeding up the approval process, streamlining risk assessment, and making it easy to access. This has made it easy for people to apply for loans on their mobile devices. The better risk modeling expands the credit for the underserved population.
Moreover, consumers can even ask for credit reports several times a year. This makes lending world transparent for everyone.
Banking
One of the sectors in which fintech is used is banking. We are living in an advanced world where people don’t have time to go to the bank for every transaction. This is why consumers demanded easy digital access to their bank accounts. For the satisfaction of its customers, every bank offers a broad range of mobile features. This has also increased the establishment of neobanks like Simple, Chime, and Varo.
Examples of Fintech
Here are some of the examples of fintech companies.
Crowdfunding Platforms
There are plenty of crowdfunding companies like GoFundMe, Kickstarter, and Patreon. These platforms enable users to send and receive money from anyone. This has also allowed pool funding for businesses and individuals. Thanks to the crowdfunding companies, there is no need to go to banks for a loan. You can go to investors directly and get support for the project.
Robo-Advising and Stocking Trading Apps
With the help of Robo-advising, the asset management industry has been disrupted. It offers algorithm-based portfolio and asset management, which will improve efficiency and reduce cost. Thanks to advanced technology, financial institutions offer Robo-advising services such as Charles Schwab, and Vanguard.
Furthermore, fintech has also led to the development of stock-trading apps. This has made it extremely convenient to buy and sell stocks, with just a click on their mobile device. People will not have to visit the stock exchange like Nasdaq or NYSE.
Investing has never been easy thanks to apps like Acorns or Robinhood. You can invest from almost everywhere with any budget.
In the end, it is predicted that this year will see further development of AI and other technologies at the consumer or back-end of fintech. According to Eyal Nachum, Moneta, Bruc Bond, and other financial institutions are working to offer a wide range of services to global customers. How do you think fintech can help businesses? Leave a comment below. n