What is Fintech? Examples and Applications

You must have been a part of the revolutionary experience when you transferred some amount of money from your bank account to an account of a family member. During the time, the traditional banking institutions were obstructed by legacy operating systems, agile and technical expertise, potent to inspire, and other similar matrices.

 

But in recent years, the time over the financial services and industry has evolved globally, making its roots strong and attracting people to transform their traditional mode of financial utilization into digital /modernized form via adopting “Fintech”.

 

“Fintech is a technical tool to support financial services.”

 

Let us explore the ultimate blend of financial services with worthwhile and agile technologies.

 

Introduction

 

Digital technology is evolving and almost every industry is taking its benefits by transforming their operating process, management and consumer services digitally. 

 

As per increasing demand of digital transformation of the entire working structure, financial institutions are too revising about their conventional processing methods and gradually adapting the solutions provider by Fintech that interprets how they are providing their services.

 

The emergence of fintech has restructured the ways organizations do businesses. The classical business model of a new business is redirecting to a local street bank and where the long-established investors are no longer into the game in the city. 

 

A steadily evolving segment under the financial services domain, Fintech assists businesses or tech focused startups in upgrading from how the financial services industry operates traditionally. From crowdsourcing to mobile payments, there are plenty of choices available presently to set up a business and to expand its horizontals. 

 

About Fintech

 

According to the definition provided by Forbes, Fintech is a portmanteau for “financial technology.” It is a one-fit-size approach that is practised to augment, streamline, and digitalize the conventional structure of financial services. 

 

Fintech is all about a blend of software, algorithms and applications for computer and mobile based tools. However, it also includes hardware as well such as smart, or connected piggy banks, virtual reality platforms.

 

Fintech platforms perform multiple tasks, covering depositing checks, transferring money from one account to another, paying bills or obtaining financial assistance. 

 

In simple terms, Fintech involves a variety of financial services/activities such as money transfer, check depositing by mobile phones, applying for a credit card without visiting a bank physically, hoisting funds for a business/ start-ups, managing own investment even without getting a person’s assistance. 

 

For instance, a bank uses Fintech for 

 

• Backend processes: to monitor behind-the-scenes account activities, and,

• Consumer-facing solutions: Such as mobile apps that are used to check balance. 

 

An individual deploys fintech from tax calculations to trifling in the markets while no demand for prior investing experience.

 

Fintech helps in facilitating the processes that formerly consume days, weeks and even months. For example, demanding for a credit score report or transferring money across the borders. 

 

More in practical employment, during the wave of COVID-19 pandemic, more and more businesses are switching to Fintech in order to accept/ enable contactless payments and other major transactions, say, e-commerce transactions, accounting, seeking assistance with government assisted programs like the Payroll Protection Program (PPP).

 

The below video explains the clear concept of FinTech. 

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What is a Fintech Company?

 

A Fintech company is the one that integrates technologies (such as AI, blockchain, and data science) with conventional financial domains in order to make them protected, swift and  more efficient.

 

One of the fastest growing tech domains, Fintech innovates companies in almost every area of finance, from payments and loans to stock trading and credit scoring.  

 

Additionally, it can be observed that the financial services industry is expanding rapidly and constantly engaging tech companies to transform how people and businesses pay out, conserve, borrow, invest and many more.

 

Turning to the one survey, provided by CB Insights, be it capital markets, insurance, digital banking or wealth management, for example, Fintech 250 (a list of 250 top commercial firms 2020) are using technology to transform their financial services, and are among the most promising companies worldwide.

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Top 250 Fintech Companies of 2020, Image Credit: CB Insights

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Applications (Examples) of Fintech

 

Various Fintech companies such as Personal Capital, Lending Club, Wealthfront have emerged in past decades while rendering new strategies on financial notions and making users allowed to hold more viable financial outcomes. Some such as financial strategies (examples) are following;

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Applications (Examples) of Fintech

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1. Mobile Banking

 

The only financial securities and wellness a consumer looks for due to which several financial institutions or bodies are continuously adopting mobile banking capabilities at a huge-expending level along with the increasing necessity of digital banking among consumers.

 

In the present scenario, most of the banks are providing types of mobile banking capabilities with some beneficiary schema and offers on their respective platforms.

 

(Also check: Banking on AI)

 

 

2. Mobile Payments

 

While everyone prefers digital platforms for payments, money management, what's new with mobile apps that provide online mobile payments, and these are the way to go. 

 

Mobile payment apps and gateways come under most prevalent uses of fintech that allow users to conduct banking activities without appearing physically in a bank. 

 

Upgrading from cash-based societies to an increasingly digital (mobile) modes of payment, peer-to-peer payments services have evolved that replace traditional payment methods.

 

 

3. Crowdfunding platform

 

Including Kickstarter, GoFundMe, and Patreon, crowdfunding platforms are the results of rigorous development in Fintech. Such platforms assist recently initiated start-ups and entrepreneurs to raise funds globally and allow them to cross geographical boundaries and come in contact with global markets and  investors.  

 

 

4. Robo-advisors

 

Robo-advisors, such as Betterment, are online investment-management services, deploying algorithms to automate investment advice in terms of lowering costs and escalating accessibilities.

 

It also helps in allocating assets optimally and generating portfolios for customers and hence permits all age groups of users for engaging in investment projects and activities at nominal fees and minimum manual efforts.

 

 

5. Cryptocurrency and blockchain 

 

Fintech includes the development and deployment of digital currencies such as cryptocurrency (bitcoin)  and is likely to have positive impacts by further growth in cryptocurrencies availability and adoption.

 

Where Cryptocurrency exchanges can be connected with users to buy or sell bitcoins, these currencies are stored in a decentralized manner under which money transactions are verified using blockchain technology.

 

Being a highly secured virtual currency, the decentralized fashion of cryptocurrency means not to be subjected to interferencing or controlling by governments as in the case of the traditional currencies. 

 

Under Fintech, blockchain solutions are focused to restrict fraud by storing authentic data in the blockchain. 

 

 

6. Insurtech 

 

Fintech companies are engaging with traditional insurance companies to automate the processes at its entirety and enabling them to expand claim-coverages. 

 

In the insurance sector, the Insurtech is the technology devised in order to maximize savings and gain efficiency from the industry-based insurance models. Insurtechs are steadily formulating the user experience in different terms such as by innovating lengthy processes, claims processing, and frequent activation. 

 

More specifically, insurtechs enables companies to give tailored insurance services and data security. It helps in streamlining the insurance process via online claim’s filing and policy management. 

 

(Most related: Introduction to Financial Analysis)

 

 

7. Regtech

 

Regtech, regulatory technology as it has known, focuses on the automation compliance rules/processes for financial institutions, especially those firms that include Anti-Money Laundering and Know Your Customer (KYC) guidelines which cope up against fraud. 

 

It offers quick and cost-effective management of massive data, including transactional data/records and compliance documents, such as corporate tax returns.

 

 

8. Trading

 

With all involved benefits, trading and investing have been upgraded with the adoption of Fintech. Financial data is often unstructured and unreadable until the advanced technologies are deployed. 

 

For example, ML, NLP and AI can be used to evaluate complex datasets and draw inferences from data. Even now, traders can conduct huge data through ML algorithms to identify trends and risks.

 

(Must check: Elements of Financial Analysis)

 

 

Summary 

 

Fintech is an innovation, describing the blend of newest technologies and designed for enhancing and automating the practise and delivery of financial services. It has changed the ways we conserve, borrow and invest money through making digital financial transactions easier and convenient, without demanding for a traditional bank. 

 

For example, 

 

• Crowdsourcing allows people with big ideas to obtain funding swiftly and easily across the world, even from investors they never had met. 

• Transferring money worldwide at minimal transaction rates is another area that is being redefined and restructured by tech innovators. 

 

The above are just examples that illustrate how Fintech has made it easier to do business and lower costs.