What is Fintech?
Fintech, it the shortened word for Financial Technology. It's a technology used by modern-day companies to provide financial services through the use of computer software. Fintech was popularized by small financial companies in order to keep up with the new age and compete with large corporations.
With Fintech, you can do financial and business transactions all at the palm of your hand. Even large corporations are now utilizing Fintech to cater to their customers. A growing number of people are now preferring to do transactions using Fintech as it does not require you to visit a bank which could take up a lot of your time.
If you don't believe it, even news is covering the rise of Fintech. CNBC featured Fintech on their news. Fintech as said in the news is a growing multi-billion dollar industry. Even TEDxTalks a popular media organization that posts talks online have featured Fintech in their Youtube channel. The talk was mainly about how Fintech is revolutionizing the banking industry which helps people have easy access to financial services. It also talked about how today's business schools and universities have not yet adopted and prepared their students to these future banking changes.
Examples of Fintech
There are many innovations on how modern age transacts their business. Fintech isn't just exclusive to Fintech financial companies. Even traditional banks do employ a certain level of Fintech in their system. It's just that it takes for them to adapt or update or change their system because of how large their company is. Fintech innovations have come a long way. From digital money to making transactions with just using your smartphone.
Fintech can now be defined as any financial technology that helps aid a person to do financial transactions without the assistance of another person. Examples of this are money transfer, applying for credit through online, raising money for a startup, managing investments using a smartphone, and etc…
More examples which are more known and actively being used by consumers are:
- Cryptocurrency and digital cash
- Blockchain Technology
- Smart contracts
- Open Banking
- Insurtech (Insurance Technology)
- Regtech (Regulation Technology)
In 2016, Fintech startups got funding of around $17.4 billion. These data came from CB Insights which came from 26 Fintech companies which are now valued at $83.8 billion
7 Things You Need To Know About Fintech
Now that we know a little bit about Fintech. Why use it? How different is it from traditional banking? What are its advantages? Well, here's 7 things you need to know about Fintech
1) Fintech is Nothing New
Just by its name, Financial Technology, Fintech has always been hand in hand with finances. For example, your ATM card is a sample of Fintech. However, technology has and always will make new discoveries. With advancement in technology means that traditional methods could become obsolete. And right now we're in the age of the computer. Your financial needs can now be done through your smartphone. Its fast, convenient, and way more efficient as you no longer have to go through various financial institutions to do your financial transactions.
But this age of technology is a game-changer. Small-scale and upstart Fintech companies can now go and compete with other large finance companies who are still adapting to the new innovations in Fintech. This provides a healthy competition in the industry that benefits you, the consumer.
2) Managing Your Money is More Convenient
With Fintech, more and more companies are battling each other to get their share of consumers for their financial services. This means competitive prices for us consumers to enjoy. Moreover, Fintech companies have lower operating costs and employ new innovative business models which means they have more flexibility to cater to the consumers. But traditional companies have also slowly employed new and innovative Fintech and they also have a loyal customer base that they can rely on. More competitors mean us consumers enjoy lower pricing for financial services.
3) Money Remittance Transfers are Quick and Cheap
If you have relatives, family members, or business transactions overseas, you'll know how a hassle it is to go to money remittance center to wire your money. It's also very expensive. But with Fintech it's way more convenient, faster, and cheaper to send money.
4) Finance Advisors in Your Phone
With the use of your smartphone, there are apps in your phone that provide financial management services. A service you could get from apps is getting financial advice. These apps use your transactional data or behavioral information to give you insights or plan to help you manage your money. It even helps you pay your bills on time.
But with you giving permission to allow apps to access your information can be a bit tricky. Things like data protection, privacy, and ethics of data usage over the internet is still a heated debate in the Congress. There was even the Cambridge-Analytica data scandal of Facebook where Cambridge-Analytica harvested millions of Facebook profiles without the owner's consent which they used for political purposes. So if you're allowing certain apps to access your information, make sure that the app's company has a good track record.
5) A Mobile Virtual Wallet
Cash is still the most used mode for transactions. It's around 85% of transactions of consumers between 2009 and 2014. Digital payment is slowly becoming a thing. With just using your phone you can buy stuff online or even in your local shops. Provided of course that they have the financial service the same as yours.
Examples of these are Paypal, Apple Pay, Android Pay, and Samsung Pay. Although, it's still hard to entice consumers to switch to digital payment because cash is still convenient and has a lot of perks with it.
6) It's Easier to Become Account Holders
Fintech companies have easier requirements in order for people to acquire an account. From 2011 to 2014, around 700 million people became account holders. And it is a growing trend as you can easily apply through online and not having to go to financial institutions and wait for a line.
This trend will continue to grow as more and more countries gain access to the internet. Most of the account holder growth is attributed to Sub-Saharan Africa.
Robo-Advisors' works the same way as a Fintech app. They collect information from the client regarding their financial situation. Its usually done through answering a questionnaire or a survey. After receiving your answers, the data is then used to calculate and offer you advice that is optimal for your situation. It also can automatically invest your assets.
Although there is the debate about robot vs. human. Some well-known companies like Vanguard, Fidelity, and Schwab have tried and moved into robot-advisors which offers investment options. Only time will tell about the future of robot-advisors. If their advice is better compared to a human or not hasn't been answered scientifically yet. What we can see here is that Fintech is making innovations to make finance easier, accessible, and cheap.
If you want to know more about Fintech check this video:
Technology will always continue to improve and consumers most of the time get the better part of it. Fintech makes managing our finances easier, faster, and cheaper. Things, like transferring money, making investment decisions, or paying for services, can be made at the palm of your hand using your phone. That is what Fintech brings right now.
Remember when we used to send letters using postal service? Now the majority of people use the internet to communicate with other people and they can even see each other's faces. That's how the technology works and that's how Fintech is turning traditional finance transactions obsolete or inefficient. Fintech is and will be hand-in-hand with Finance. It brings innovation in order to improve the existing traditional finance system. And we as consumers should be glad that things are getting more convenient for us.