Understanding Fintech and its impact on the market.
Financial technology (abbreviated Fintech) refers to new technology that aims to improve and automate the delivery and usage of financial services. Fintech, at its heart, is used to assist corporations, company owners, and consumers in better managing their financial operations, procedures, and lives through the use of specialized software and algorithms that are used on computers and, increasingly, smartphones. Fintech is an abbreviation for financial technology. When the term ‘FinTech’ first appeared in the twenty-first century, it was initially used for the back-end technology systems of established financial institutions. Nonetheless, there has been a shift to more consumer-oriented services and thus a more consumer-oriented definition since then. Education, retail banking, fundraising and nonprofit, and investment management are just a few examples of fintech sectors and industries. Fintech also encompasses the creation and use of cryptocurrencies like Bitcoin. While that sector of fintech receives the most attention, the real money is still in the traditional global banking business, which has a multi-trillion-dollar market value.
In general, the word ‘financial technology’ refers to any advancement in how people do business, from the introduction of digital money to double-entry accounting. Yet, financial technology has evolved explosively since the Internet and mobile Internet/smartphone revolutions. Fintech, which initially referred to the application of computer technology to the back office of banks or trading organizations, it now refers to a wide range of technological intrusions into personal and commercial finance. Fintech currently refers to a wide range of financial activities that can be performed without the assistance of a person, such as money transfers, check depositing with your smartphone, applying for credit without visiting a bank office, seeking funds for a business beginning, or managing your investments. According to EY’s 2017 Fintech Adoption Index, one-third of customers use at least two or more fintech services, and these consumers are becoming more aware of fintech in their daily lives.
The most talked-about (and funded) fintech startups all have one thing in common: they are designed to be a challenge to and ultimately usurp entrenched traditional financial service providers by being more agile, serving an underserved segment of the population, or providing faster and/or better service. Affirm, for example, aims to eliminate credit card firms from the online shopping experience by providing users with the ability to acquire quick, short-term loans for purchases. While interest rates can be exorbitant, Affirm claims to provide a way for people with bad or no credit to acquire loans while simultaneously building their credit records. Similarly, Better Mortgage aims to simplify the home mortgage process (and eliminate the need for traditional mortgage brokers) by providing users with a confirmed pre-approval letter within 24 hours of applying. GreenSky aims to connect home repair borrowers with banks by assisting customers in avoiding entrenched lenders and saving money on interest by providing zero-interest promotional periods.
Emerging technologies, such machine learning/artificial intelligence (AI), predictive behavioral analytics, and data-driven marketing, will remove the guesswork and habit out of financial decisions. “Learning” apps will not only study users’ hidden patterns, but will also involve users in learning games to improve their habitual, unconscious spending and saving decisions. Fintech is also an early adopter of automated customer service technologies, using chatbots and AI interfaces to help clients with basic tasks while simultaneously lowering staffing expenses. Fintech is also being used to combat fraud by using payment history information to detect transactions that are out of the ordinary.
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