Fintech, also called, Financial technology, has been used to describe the latest technology that tries to improve as well as automate the delivery and usage of different kinds of financial services. It is used to help several companies, consumers and business owners to handle their financial processes, operations and lives with proper algorithms and specialized software used on computers and smartphones.
The term was initially been applied to the technology that had been employed at the back-end systems for established financial institutions. Since then, there had been an inclination to consumer-based services and consumer-oriented definition. Fintech application development has different industries and sectors that include – education, retail banking, investment maganement, non-profit organizations and fundraising. Fintech also consists of the development and use of crypto-currencies like bitcoin.
The term “financial technology” is applicable to any innovation in how people can transact their businesses, starting from the invention of digital money to double-entry bookkeeping. With the internet and smartphone revolution, the financial technology has grown greatly and fintech is applicable to the back office of trading firms or banks. They are now a wide variety of technological interventions into personal and commercial finance.
Fintech describes different types of financial activities such as money transfers that deposit a check with your smartphone, bypass a bank branch to apply for credit, raise money for a business startup, or manage your investments without the assistance of any person.
Fintech in Practice
The most talked-about fintech app development startups have been designed to become a threat for facing various challenges and entrenching traditional financial service providers with quick service and underserved segment.
If you wonder why some aspect of your financial life is so unpleasant, Fintech possibly will have a suitable solution. The lender will want to make FICo outdated with different data sets to determine its creditworthiness. This will include – employment record, education and if a would-be borrower is aware of their credit score to decide if to underwrite and how they can apply for loans.
Fintech’s Expanding Horizons
Financial services institutions have provided different services under the same roof. The possibility of such services includes a wide range from traditional banking activities to mortgage as well as trading services. Fintech will be incorporating these services in individual offerings in the basic form. Thus, the combination of such streamlined offerings with technology allows different fintech companies to become efficient and lessen the costs associated with every transaction.
One word that describes how different fintech innovations have already affected traditional banking, trading, banking, financial advice, and products, is ‘disruption,’ like financial products and services. The tech-savvy industry observers have warned that keeping apace of fintech-inspired innovations needs much more than being ramped up tech spend. So, competing with the startups requires a significant change in the processes, thinking, corporate structure and decision-making.
Fintech and New Tech
Newer technologies such as artificial intelligence/machine learning, data-driven marketing and behavorial analytics will take up the estimation and opt out all financial decisions. “Learning” apps will know the habits of users that are hidden to themselves and engage users in learning games for making automatic spending and saving decisions. Fintech is a keen adaptor of automated customer service technology that uses chatbots to and AI interfaces to help customers with basic tasks and reduce staffing costs.
Some of the active areas of fintech innovation consist of the following areas:
- Digital cash and cryptocurrency
- Blockchain technology that includes Ethereum, a distributed ledger technology (DLT) for maintaining records on a network of computers without any central ledger.
- Smart contracts that use computer programs to carry out contracts automatically between the buyers and the sellers.
- Open banking which is a concept on the blockchain that third-parties should have access to bank data for building applications and creating a connected network of third-party providers and financial institutions.
- Insurtech that uses technology to simplify and streamline insurance sector.
- Regtech for helping financial service companies to fulfill industry compliance rules.
- Robo-advisors use algorithms to automate investment advice for increasing accessibility and reducing costs.
- Unbanked/underbanked services that serve low-income individuals who are ignored by the traditional banks or financial services companies.
- Cybersecurity that has given the proliferation of decentralized storage of data, cybercrime, cybersecurity and fintech have been intertwined.
There are four categories of users for fintech:
- B2B for banks
- their business clients
- B2C for small businesses
The trends towards increased data, information, mobile banking, accurate analytics and decentralization of access will create varied opportunities for all these four groups to interact with exceptional ways.
With most technologies the younger you may be, the more chances it will have to describe about fintech. The fact is that consumer-based fintech will mainly target toward millennials with huge size and earning potential of that segment.
When it is about businesses, a startup or a business owner will visit a bank to startup capital or secure financing. If they can accept payments through credit card, then they will build a relationship with the card provider and install infrastructure like landline-connected card reader. But with the help of mobile technology, such hurdles are now a thing of the past.
Regulation and Fintech
Financial services are the leading heavily regulated sectors in the entire world. This kind of regulation has emerged as major concern among governments as fintech app development companies are now taking off.
Since the latest technology has been integrated into financial services processes, the regulatory problems for such companies have already multiplied. In some situations, the problems are actually a function of the technology but for others, they are believed to be a reflection of the tech industry’s irritation to disrupt the finances.
The digitalization of data and automation of processes will make fintech systems highly susceptible to attacks from the hackers. Recent instances of the hacks at banks and credit card companies are illustrations of the ease with which people may get access to systems that can lead to irreparable damage. The most important question for the consumers is to be relevant with the responsibility for such attacks, misuse of financial data and personal information.
Regulation has also become a major problem in the emerging world of cryptocurrencies. As ICOS or Initial coin offerings are the new form of fundraising, they enable different startups to raise capital directly from the investors. In most countries, these are usually unregulated and have become fertile ground for frauds as well as scams. Regulatory uncertainty for ICOs has enabled the entrepreneurs to slip security tokens in the form of utility tokens before the SEC to prevent compliance costs and fees. You can play free bitcoin games and win real-time cash
Due to diversity of offerings in fintech and other industries, it is quite difficult to draft a single and comprehensive approach for these problems. For the most part, governments have already used the present regulations and tailored them to adjust with fintech app developers in certain cases.