What is Fintech? A Quick Definition
Fintech, a portmanteau of “financial technology,” is the application of new technological advancements to products and services in the financial industry. Our guide will walk you through what it is and how it’s being used.
FINTECH INDUSTRY OVERVIEW
Fintech is a portmanteau of the terms “finance” and “technology” and refers to any business that uses technology to enhance or automate financial services and processes. The term encompasses a rapidly growing industry that serves the interests of both consumers and businesses in multiple ways. From mobile banking and insurance to investment apps, fintech has a seemingly endless array of applications.
The industry is huge — and will continue to expand for years to come. One driving factor is that many traditional banks are supporters and adopters of the technology, actively investing in, acquiring or partnering with fintech startups because it is easier to give digitally-minded customers what they want, while also moving the industry forward and staying relevant.
WHAT IS A FINTECH COMPANY?
Fintech companies integrate technologies (like AI, blockchain and data science) into traditional financial sectors to make them safer, faster and more efficient. Fintech is one of the fastest-growing tech sectors, with companies innovating in almost every area of finance; from payments and loans to credit scoring.
How does fintech work?
Fintech is not a new industry, it’s just one that has evolved very quickly. Technology has, to some degree, always been part of the financial world, whether it’s the introduction of credit cards in the 1950s or ATMs, electronic trading floors, personal finance apps and high-frequency trading in the decades that followed.
The guts behind financial technology varies from project to project, application to application. Some of the newest advances, however, are utilizing machine learning algorithms, blockchain and data science to do everything from process credit risks to run hedge funds. In fact, there’s now an entire subset of regulatory technology dubbed “regtech” designed to navigate the complex world of compliance and regulatory issues of industries like, you guessed it, FinTech.
As fintech has grown, so have concerns regarding cybersecurity in the fintech industry. The massive growth of fintech companies and marketplaces on a global scale has led to increased exposure of vulnerabilities in fintech infrastructure while making it a target for cybercriminal attacks. Luckily, technology continues to evolve to minimize existing fraud risks and mitigate threats that continue to emerge.
FINTECH EXAMPLES & USES
Though the industry conjures up images of startups and industry-changing technology, traditional companies and banks are also constantly adopting FinTech services for their own purposes. Here’s a quick look at how the industry is both disrupting and enhancing some areas of finance.
Mobile banking is a large part of the fintech industry. In the world of personal finance, consumers have increasingly demanded easy digital access to their bank accounts, especially on a mobile device. Most major banks now offer some kind of mobile banking feature, especially with the rise of digital-first banks, or “Neobanks”.
Neobanks are essentially banks without any physical branch locations, serving customers with checking, savings, payment services and loans on completely mobile and digital infrastructure.
Investment & Savings
Fintech has caused an explosion in the number of investing and savings apps in recent years. More than ever, the barriers to investing are being broken down. While these apps differ in approach, each uses a combination of savings and automated small-money investing methods, such as instant round-up deposits on purchases, to introduce consumers to the markets.
Moving money around is something FinTech is very good at. The phrase “I’ll send you the money now” is now a replacement for “I’ll pay you later.”. Payment companies have changed the way we all do business. It’s easier than ever to send money digitally anywhere in the world.
FinTech has totally changed how people carryout transactions and will continue to evolve overtime. Keep watch.