What is Fintech? The importance of Fintech to the financial industry?

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2021-03-23 09:25:20

What is Fintech?

Fintech is typical of the terminology of finance and technology. Refers to the use of financial technology or process automation and services.

The English name is “Financial Technology”. The term refers to a vast and rapidly growing industry serving both consumers and businesses. From insurance and internet to investment applications, money and money as Bitcoin,… Fintech is applicable.

Watch now: What is Bitcoin?

This industry is huge. An example for ease of visualization:

Fintech, the birthplace of unicorn start-ups (start-ups valued at over $ 1 billion). This is what motivates banks to be technology adopters and advocates. By acquiring, actively investing, cooperating with fintech startups.

– Take the above action for a bank or business that says: Providing their customers with digital tools to help them be efficient in operations, growing and suitable for life is a great thing.

What is Fintech Company?

Fintech companies are integrating AI, blockchain, and data science technologies into the financial sector to make them safer, faster and more efficient.

Fintech is one of the fastest growing technology sectors. With innovative companies in most financial sectors. From payments and loans to credit scoring or transactions forex, stock,…

How Fintech works?

Fintech is not a new industry, it just grows too fast. Technology has, in a way, always been a part of the financial sector.

Even the advent of credit cards or ATMs, electronic exchanges. Or the personal finance and high-frequency trading applications of the coming decades.

It varies from project to project, application to application. However, some of the latest advancements are using machine learning algorithms, blockchain, … to do everything. From credit risk handling to running hedge funds.

Who uses Fintech?

Each of us must have a few fintech related apps on our phones. Then see who else fintech is used by and in what ways.

Business to business (B2B)

Before fintech develops, businesses will go to banks to borrow capital and finance. But when fintech was born, businesses could easily borrow money, finance and other financial services through mobile technology.

In addition, the platforms are based on cloud computing. Or even customer relationship management services that receive reports providing B2B services that allow companies to interact with financial data to help improve their services.

Business to customer (B2C)

Fintech has many businesses for customers, or B2C applications. Payment applications like PayPalApple Pay both allow customers to transfer money over the internet or mobile technology, and budget apps allow customers to manage their finances and expenses.

Much of the bank’s first forays into fintech have been focused on B2C applications with lending and payment services.

Fintech’s application

Though the industry evokes the image of startups. Or technology changes industries, companies and traditional banks are also constantly adopting fintech services for their own purposes.

Here’s a look at how some industries both disrupt and strengthen certain financial sectors.

Bank

Mobile banking is a large part of the fintech industry. In the personal finance sector, consumers increasingly require easy digital access to their bank accounts, especially on mobile devices. Most of the big banks nowadays offer some mobile banking features.

Especially Neosbank (new digital banks, no transaction offices or branches, all activities take place on the internet). Too convenient, right.

Cryptocurrencies and Blockchain

Along with Fintech is the birth of cryptocurrency and blockchain. By comparison, the two fields are different technologies outside of fintech.

But there are free apps that all 3 can work together. The aim is to provide new financial services. There are companies that use redistributable ledger technology to transform financial transactions.

An example of ShapeShift: The use of blockchain to facilitate secure, real-time cryptocurrency swaps. You want to convert Bitcoin of you for Ether? Users can quickly change currencies for each other at real-time rates.

Watch now: Ethereum [ETH] what? Details on Ethereum 2.0 [2020]

Shapeshift and fintech

Invest and save

Fintech has created an explosion in the number of investment and savings applications in recent years. Although these applications differ in approach. Each application uses a combination of savings and investment with a small amount of money. Easy to introduce consumers to the market.

Machine Learning and trading

With billions of dollars created. It’s no surprise that machine learning is playing an increasingly important role in fintech. The power of AI lies in its ability to run large amounts of data through algorithms designed to detect trends and risks.

Eg JPmorgan chase works with thousands of companies and millions of customers around the world. It has access to a database of spending history and macroeconomic trends.

To better understand data, the bank uses big data analytics and machine learning to predict where the market is headed. Thereby monitoring the variables that can affect the market trend.

application by jpmorgan chase

Pay

The global mobile payments market is on track to surpass $ 1 trillion in 2019.

Using increasingly sophisticated technology. Services appeared to allow consumers to exchange money. Pay online or on mobile devices. It’s easier than ever to send money anywhere in the world. For example, the brother used to use like Paypal,… and many more.

Insurrance

Insurance is a somewhat slow technology application. Many fintech startups are partnering with traditional insurance companies to help automate processes and expand coverage.

From mobile car insurance to wearables to health insurance. The industry is undergoing tons of innovation.

Community fundraising platform

The crowdfunding platform allows internet users, apps to send and receive money from others on the platform, and has allowed individuals or businesses to gather funding from multiple sources in one place.

Instead of going to a traditional bank to borrow money. Now it is possible to go directly to the investors for the support of a project. While apps range from family and friend sponsorship to fan and patron sponsorship, the number of crowdfunding platforms has multiplied over the years.

And there are many other real world fintech examples. Shows its influence as well as its value to industries in particular and in human life in general.

The impact of Fintech on banks

Most people also know that the majority of people surveyed said they want to open a new bank account or apply for a new loan. Furthermore, they will not open an account with a financial institution that does not have a local branch.

Impact of banks

Although there are branches, or ATM still plays a major role in the bank such as:

  • Relatively simple transactions have shifted to digital channels. But affiliates are still involved for more complex transactions.
  • Strict customer rules (KYC). Or money laundering in many different countries requires personal contact for specific transactions. Especially for first-time customers.
  • Many customers prefer to personally advise on the products even when conducting research.
  • Likewise, many people prefer to visit a branch to open a new account. Learn about budgeting, …
  • Security concerns: Branches offer a sense of endurance and security that digital banks can hardly match.

The bank’s strategy with Fintech is investment, cooperation and acquisition

Banks are starting to recognize the emerging threat of FinTech companies. As FinTech startups begin to gain momentum, fear arises among the banking institutions.

As I mentioned, this has resulted in the rise of banking innovation institutions to fight FinTech through investments, partnerships or acquisitions:

  • Global investment in FinTech companies between 2010 and 2017 reached more than $ 97.7 billion. With startups in the US accounting for 54% of total investment. Followed by England and India. FinTech transactions globally, growing at a compound annual rate of 35%. With total funding increasing at a CAGR (compound annual growth rate) of 47%.
  • Nearly all FinTech acquisitions in 2018 are led by US and EU banks. While FinTech of the US and the EU is the main target for the acquisition. Start-ups in Asia and other regions are also being targeted as lucrative lures.

The amount of investment is too great, and the application to the banking system is theirs. There will be development banks, there will also be banks that grow slowly.

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