Financial Technology or FinTech is the word of the decade with increased acceptance worldwide especially after the pandemic era. It is a broad term consisting of various parameters in its domain. Let’s have a look on Fintech and its sphere with all the primary questions running in our mind.
What is FinTech?
Fintech is an alliance of two words- Finance and Technology. When combined, FinTech turns into a multi-faceted concept describing any technology that delivers financial services through software, such as smart banking services, mobile payment applications and most concurrent topic cryptocurrency. It is a broad category that encompasses many technologies, but the elementary objectives are to change the way consumers and businesses access their finances and compete with conventional financial services. This proliferating Fintech arena has revolutionized major industries in the realm of traditional trading, credit services, insurance and risk management industries.
Fintech now includes different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management, to name a few.
But, do you know the exact origin of the modern FinTech stacks?
Origin Of The Modern FinTech Stacks
Now we think of fintech in terms of cryptocurrencies and start-up banks, but its roots can be traced back to the late 19th century how people used to transact business, from the invention of digital money to double-entry bookkeeping. The first transatlantic cable and Fedwire in the USA in 1886 enabled the first electronic fund transfer system using technologies such as telegraph and Morse code.Fintech at that era meant use of computer technology applied to the back office of banks or trading firms.
Thereafter first ATM, first digital stock exchange NASDAQ, and SWIFT also came into existence as a Fintech stack for finance.The 1990s saw the first movements towards digital banking, PayPal was launched which would hint towards the new payment Fintech systems and IT integration that would come as the world increasingly went online. Thereafter, Smartphones flooded the market and people started internet usage for mobile banking and other financial services with the advent of cloud computing and back office automation. Then Bitcoin was born in 2009 followed by other cryptocurrencies and NFT’s using blockchain technology.
It became the era of the start-up, with an appetite for innovation amongst investors and consumers driving a wave of new products and services. Undoubtedly web 2.0 advanced to web 3.0 and Artificial intelligence and machine learning came into enormous limelight. But as we all know every coin has two sides, so does AI.
Cyber threats also came to foreplay for which Cybersecurity measures have been formulated.
Fintech companies, which include startups, technology companies and established financial institutions, utilize emerging technologies, such as big data, artificial intelligence, blockchain and cloud computing to make financial services more approachable and efficacious. Since the Internet revolution web 2.0 and the smartphone revolution, however, financial technology has grown volatile to web 3.0 and metaverse. Few more examples are money transfers, depositing a check with your smartphone, bypassing a bank branch to apply for credit, raising money for a business startup, or managing your investments, generally without the assistance of a person. According to EY’s 2017 Fintech Adoption Index, one-third of consumers utilise at least two or more fintech services and those consumers are also increasingly aware of fintech as a part of their daily lives.
Why It Has Been The Word Of The Decade?
As the world began to shift towards a more digitized lifestyle, consumers became user friendly along with a sip of coffee while using digital tools to carry out their daily tasks. This is transparently reflected when they manage their finances. As a matter of astonishing fact global Google searches for “fintech” increased more than 1,000-fold between 2014 and 2021.After the credit card, financial technology evolved and introduced several major milestones to the mass market, such as ATMs, electronic stock-ex, bank mainframe computers, and online stock exchanges.
Each fresh pie of technology advanced the financial infrastructure that bulk people used everyday, but rarely had to think about.
Fintech refers to the integration of technology into offerings by financial services companies in order to ameliorate their use and delivery to clients. It chiefly works by unwrapping offerings by such firms and creating new markets for them.
The above chart shows the global Fintech market revenue of 2017 vs 2024(expected).
The above chart shows the number of startups in the fintech domain worldwide from 2000 to 2022. Therefore we can clearly imagine the size at which this market is robustly growing and has become aptly the most talked about terminology of the decade.
What Actually Fintech Embraces?
- Digital Wallets and Payment gateways (PayPal, Venmo, Square, Apple Pay)
- Cryptocurrency and Blockchain DLT (virtual currency like Bitcoin)
- SaaS Platforms (Software as a service)
- Crowdfunding platforms ( Kickstarter, GoFundMe)
- BNPL (Buy now pay later)
- Contactless technology (Digital cash, tokens like NFT)
- Insurtech (Oscar Health, Credit Karma )
- Regtech (Anti-Money Laundering, KYC protocols)
- Robo-advisors (algorithms to automate investment advice-Betterment, Ellevest)
- Smart assistants (siri, hey google)
- P2P lending (Prosper, Upstart allow)
- Personal Finance apps (Mint, Quicken)
- Payments (Venmo, Zelle)
- Stock trading apps (Robinhood, Acorns)
Usage Of Fintech For A Common Man
Since fintech first appeared on the scene, the sector is enabling consumers to manage their finances expediently online thereby changing their financial usage lifestyle. Despite primary challenges during the pandemic, this industry boomed favourably. At a time when shops around the world closed, the evolution of e-commerce developed new online shopping habits, ultimately driving the growth of digital payments.
The use of smartphones for mobile banking, investing, borrowing services, and cryptocurrency are examples of technologies designed to make financial services more accessible to the general public. Earlier people had to physically visit banks for any small or big financial assistance or service but today fintech has made it possible to invest, borrow, save and transfer funds through online apps without ever stepping foot outside home. Though the conventional institutions were laggards to transpose fintech solutions, both startups and established companies invested into the new super power digitized world.
Today, every individual can benefit from a plethora of self-service Fintech tools.
Exploring Fintech Through Lens
Apart from making banking more accessible and brisk, the technological innovations influence reach is very diverse.
FinTech enhances relationships directly with customers through the launch of Crowdfunding Platforms. PayPal Holdings is the unquestioned leader in online payments, but it is so much more than that.
It allows small businesses, entrepreneurs, charities and artists to receive support without raising money from conventional investors.Social change is another chief promise that many Fintech firms, especially in the global south, aim to reach by taking into account demographic and social needs.
Popular fintech programming languages include Java, C++, Python, and Ruby. Fintech has also given birth to InsureTech successfully which embodies from online policy handling, data protection to tailored insurances. Robo-advizing has disrupted the asset management sector by providing algorithm-driven recommendations and a customized portfolio management which has significantly reduced human assistance. Although it may sound like diving into the pool of FinTech without the experience of swimming, this is how one actually learns. So let’s dive in with knowledge of course and we can learn a lot about this Fintech pool.
Future Wings Of Fintech
In 2022, 82% of monetary organizations state they are in favor of expanding their fintech arena, showing an elevated degree of trust in innovation. In the meantime, 67% concede that inability to put resources into a computerized future really intends that there won’t be a very remarkable future to consider.
The global digital banking platform market is expected to grow at a compound annual growth rate (CAGR) of 11.5 percent by 2026.The long periods of new offers, item developments, plans of action and mechanical capacities inside the universe of fintech have just barely started. Quite a bit of fintech’s development will be driven by imagination and a guarantee to convey enhanced encounters to buyers. Forrester’s “Territory of Fintech 2022” report uncovers that imagination not just produces clever thoughts, creative advancements, savvy critical thinking – yet in addition catalyses a development outlook in organizations to carry new devices and answers for everybody.
As the fintech scene keeps on extending, fintech planning to develop their organizations will benefit extraordinarily from advanced publicizing and addressability – conveying significant and customized promotions. New Techs, similar to AI (computer based intelligence), predictive behavioral analytics, and data-driven marketing, will take the guesswork and habit out of financial decisions. Fintech is likewise a sharp connector of computerized client support innovation, using chatbots and simulated intelligence points of interaction to help clients with fundamental undertakings and furthermore hold down staffing costs.
Fintech is additionally being utilized to battle extortion by utilizing data about installment history to signal exchanges that are outside the standard.Startups disrupt incumbents in the finance industry by expanding financial inclusion and using technology to cut down on operational costs. Fintech funding is on the rise but regulatory problems exist.
[To share your insights with us, please write to firstname.lastname@example.org]