Financial technology, more commonly known as fintech, is all around us. You can see fintech adoption from daily activities such as buying coffee at your local shop to huge payment apps and cryptocurrency. Fintech aims to improve the delivery of financial services and make them more accessible to the public. Though it is still an emerging industry, fintech investments globally rose to $55.3 billion in 2018, more than double of the $26.7 billion in 2017.
If you still wonder what is fintech, check out the information below. In this post, we’ll answer how does fintech work and give you examples of its use.
Fintech refers to the innovative use of modern technologies to enhance the delivery of products and services in banking, investing, insurance, and other fields related to finance. It also refers to any company using software, mobile devices, the internet, or the cloud to create and deliver financial services. Fintech companies provide alternative finance and compete with banks in the majority of areas in finance by offering customers fintech products and solution to tech-savvy clients. According to Statista, there are 5,779 fintech startups in the Americas, 3,583 in Europe, Africa, and the Middle East, and 2,849 in the Pacific Region and Asia as of February 2019.
How is fintech being used in the financial industry? Here are the best fintech examples of the year 2019:
Ask any young person – millenials and Generation Z – what their go-to payment method is, and they will probably tell you that they pay through mobile apps. Thanks to technological innovation, the global economy is fast moving from cash-based to digital transactions. At least 64% of smartphone users have used any type of mobile payment in the last year. Examples of mobile payment methods include Apple Pay, Google Wallet, and PayPal services.
Fintech can also be seen in insurance. Also called insurtech, it encompasses home insurance, car insurance, and data security. Fintech innovations have impacted the insurance industry by improving efficiency, reducing costs, improving risk assessment, and delivering better customer experience. According to a study by Accenture, insurers are paying more attention to insurtech with 86% believing that rapid innovation is a must if they are to retain a competitive edge in the market.
“For FinTech, Bitcoin’s ability to facilitate secure transactions when operated by a few thousand volunteer servers is evidence that perhaps the same could be done for existing interbank, or bank-to-bank (B2B), transactions, which are operated using secure dedicated servers,” notes Ittay Eyal, Cornel University. Blockchain technology and cryptocurrency have helped make financial transactions faster and more secure. Some cryptocurrency trading platforms include Coinbase, Robinhood, Cash App, Gemini, and Binance. About 61% of big digital industry names have invested in blockchain technology, according to the Digital Enterprise Report by Okta.
Through robo-advisors (digital-based financial advisors), customers can get answers to investment and finance more efficiently and at lower costs. Robo-advisors can tailor investment plans to the respondents’ unique attributes, including age, risk tolerance, current debt, personal assets, and such. Examples of rob-advising services are Ellevest, Wealthfront, The Vanguard Group, Ally Financial, and Betterment.
Through open banking technology, you can borrow money without hassle electronically. Open banking refers to the sharing of financial data electronically and securely under customer-approved conditions. Lots of lending apps leverage a customer’s transactional information to make lending decisions. Some use peer-to-peer lending where users can get loans without the need for bank involvement.
Other fintech startups provide customers free credit reporting, including updated scored and insights. Credit Karma, an excellent example of such a company, also allows customers to check and compare different loans and credit card offers.
Virtual assistants have made users mobile experience and access to services from financial institution timely and easy. With this technological innovation, customers can access their credit score data, get alerts about fraud, and make voice or text-enabled payments. An example of this is Eno, Capital One’s AI assistant.
Last by not least is another alternative finance example is budgeting apps. Created as a fintech solution for customers who struggle to track their finances and spending, these apps have steadily grown in popularity. They help customers keep their income, monthly spending, and payments in check. Examples include Acorns, Mint, and PocketGuard.
Fintech adoption will continue to disrupt the delivery of financial services. Currently, fintech companies are pushing the boundaries in payment, lending, insurance, blockchain, and other influential financial services. As such, more financial institutions will be forced to invest in fintech startups to keep up with the ever-changing digital trends.
Are you a CFO looking for ways to use technology to enhance your leadership? Read the article “What technologies do CFOs require for leadership success?” to learn more.