What is Fintech?
Fintech, a portmanteau of “financial technology,” is the application of new technological advancements to products and services in the financial industry. Our guide will walk you through what it is and how it’s being used.
FinTech industry overview
Fintech is a portmanteau of the terms “finance” and “technology” and refers to any business that uses technology to enhance or automate financial services and processes. The term encompasses a rapidly growing industry that serves the interests of both consumers and businesses in multiple ways. From mobile banking and insurance to investment apps, FinTech has a seemingly endless array of applications.
The industry is huge — and will continue to expand for years to come. One driving factor is that many traditional banks are supporters and adopters of the technology, actively investing in, acquiring or partnering with FinTech startups because it is easier to give digitally-minded customers what they want, while also moving the industry forward and staying relevant.
We have classified the benefits that set FinTech businesses apart into four categories:
1. Speed
In today’s fast-paced world, waiting for an international payment to go through, or for a bank to grant a loan can sometimes take what feels like forever. That is why FinTech companies rely on efficiency to set themselves apart. Where traditional banks rely on age-old processes and multilayer checking, FinTech innovations such as the use of algorithms, artificial intelligence, and automation work towards speeding up processes. The advancements of FinTech make it possible to process applications and approvals much faster than traditional banks, which results in a better overall user experience. But speed also means accessibility and another benefit of FinTech is its convenience.
2. Convenience
The COVID-19 pandemic has contributed to the rapid rise of FinTech. Given FinTech companies heavily rely on the Internet and mobile connectivity, they came out as one of the big winners of the pandemic. Their high level of connectivity allows them to reach a wide audience and allows their audience to reach them at the touch of a button. The flexibility they offer in terms of time and location makes them entirely adaptable to their clients’ needs. While traditional banks tend to rely on in-branch appointments that demand patience on the part of the client, some FinTech firms use chatbots, making them easily accessible 24/7 and in many languages. Today, customers look for convenience in every aspect of their lives and FinTech firms have learned to meet this need far quicker than traditional banks.
3. Transparency
Today’s consumers are wary of unexpected fees which is why FinTech firms believe in laying out all their cards upfront. When it comes to payments, transparency also means better visibility regarding payment timeframes and the progress of transactions. Today, people are used to track where things are, whether it’s parcels or food. Naturally, they expect the same level of transparency from their banks.
4. Price
Whether it’s currency conversion rates, processing fees, or commissions, FinTech businesses know that users today are particularly attentive to costs. That is why they offer payment solutions that include as few extra costs as possible and a competitive overall price. FinTech innovations often make it possible to offer lower prices to consumers and businesses compared to traditional banks. Having better visibility of the various costs incurred may represent considerable savings for a company.
Conclusion
The future of FinTech is bright. While the benefits of FinTech have never been so evident, partnerships between FinTech businesses and banks are the most likely outcome for the future and offer the best of both worlds. Fintech brings flexibility, agility, and innovation while conventional banks, as well-established, trusted institutions, provide a stable environment and can make use of vast amounts of customer data. With conventional banks able to provide a sound and trustworthy environment, and FinTech firms banking on their niche expertise, the financial service landscape of the future will undoubtedly require the two industries to work hand in hand.