FinTech is an acronym that stands for “financial technology.” Initially, FinTech was viewed as a countercultural techpreneur movement aimed at upending traditional banking and lending’s onerous rules and strong reluctance to change. It referred to backend processes for configuring servers and software applications for traditional banking institutions’ front ends. The idea was to make it easy to transfer and receive money.
It is more difficult to define FinTech today because its meaning has increased, as has the available financial technology. What hasn’t changed is the use of technology by FinTech to challenge the traditional financial services business. In summary, FinTech is an ever-changing umbrella word for enterprises that utilize technology to automate, modify, or improve financial services for both corporations and consumers.
How is FinTech changing business?
Financial technology startups and established companies serve various audiences with myriad technologies and services. While FinTech benefits a broad spectrum of customers, its tech offerings prioritize two essential elements: accessibility and speed.
This is what FinTech brings to businesses:
- Quick and easy access to strong financial tools FinTech is an equalizer, allowing firms of all sizes and across all industries to rapidly access powerful financial instruments. Businesses may quickly access complicated, feature-rich financial software suites and managed services by using fast, always-on internet connections, large data, and mobile connectivity. Such configurations used to cost millions of dollars in fees, equipment, licensing, trained personnel, and specialized IT teams.
- Exceptional business insights FinTech has developed intelligent information displays that include real-time updates and data analytics. Business leaders obtain exceptional business insights with this information at their fingertips. They can change their marketing plan on the fly to capitalize on favorable conditions or pivot to a new strategy.
- Customer convenience and accessibility FinTech solutions enable organizations to provide new access to their customers. Customers can benefit from intuitive software interfaces, excellent user experiences, fast internet bandwidth, and other services. Customers can access financial information and transactions via mobile devices or PCs in real time. These breakthroughs have fueled omnichannel payment processing, mobile banking, peer-to-peer payments, and even innovative approaches to credit application evaluation.
What sectors are now being affected by FinTech?
Payment processing, asset management, cryptocurrencies, and other industries are being transformed by today’s FinTech firms. Here’s a look at how businesses are utilizing FinTech to improve and expand their offerings in order to better serve their customers.
1. FinTech is transforming payment processing
Payment processing has long been a top FinTech priority. Customers expect transactions to be as simple as possible while still keeping the greatest security standards. To make transactions seamless and secure, the finest payment processing firms employ cutting-edge financial technology. Here are a couple such examples:
- Square In the public view, Square is undoubtedly the most well-known FinTech startup. Square’s breakthrough smartphone card-swiper technology made mobile payments commonplace. Read our comprehensive Square review to discover more about the financial technology that powers the service.
- Stripe Stripe is Apple’s official mobile payment partner for Apple Pay. It is also a pioneer in mobile and app-based checkout solutions. Stripe’s technology integrates with Apple’s iOS-based biometric security and digital wallet technology, allowing millions of customers to check out in multiple apps and mobile sites using their phones’ Face ID or Touch ID. Stripe is also our favorite online payment processor; read our Stripe review to find out why.
- Payfirma Payfirma was the first company in Canada to introduce mobile smartphone card reader technology in 2011. Since then, the company has grown into a global omnichannel merchant account services processor, assisting businesses in accepting credit and debit cards online, in shops, and on mobile devices.
2. Alternative lending is being disrupted by FinTech
Alternative lending services offer unique methods to personal loans, extending lending possibilities to more people and making application processes faster and easier than traditional financial institutions. Here are a few examples of alternative lenders powered by FinTech:
- Prosper. Prosper was the first peer-to-peer lending platform, having launched in 2005. It has survived numerous modifications and industry laws to become a well-known alternative lender.
- LendingClub. LendingClub debuted in 2006, shortly after Prosper. LendingClub, like Prosper, began as a peer-to-peer loan marketplace and had many of the same difficulties and industry regulation challenges. It has grown to become the largest marketplace of its kind.
- Upstart. Upstart is a one-of-a-kind personal lending service developed by ex-Google workers. To provide a more realistic lending rate, it evaluates your education and employment history in addition to your credit score. As a result, it provides lending chances to more people than traditional services.
3. FinTech is making inroads into wealth management and automated investing
Automated investment services, often known as robo advisers, use machine learning algorithms and massive amounts of data to make investing simple and affordable, eliminating the need for a costly human advisor. Here are a couple such examples:
- Betterment. Betterment, one of the first automated investment platforms, provides a website with an easy-to-follow, transparent approach to assist novice investors in starting their wealth-building journey. Betterment has cheap costs and no minimum account balance.
- Wealthfront. Wealthfront, unlike Betterment, has a $500 minimum but no fees for the first $10,000 managed. It’s a tempting offer for first-time investors.
- Nydoz. Nydoz is a pioneering fintech investing platform that allows individuals and businesses to invest in the future. Anyone, from anywhere, can invest using their mobile phones or computers. It has developed three investment plans to meet a wide range of investing demands. Investing is completely free for investors. Investors can withdraw their interest on a regular basis, providing a steady source of income. The principal, on the other hand, is held until the term period ends, ensuring that investors get the most out of their investment. Nydoz is an appealing investment option due to its ease of use, reasonable return policy, security precautions, and transparency. A fintech company is laying the groundwork for the future of investing.
4. FinTech is driving cryptocurrency adoption
Many rival FinTech-powered cryptocurrency exchanges would gladly accept your funds, but these two firms are among the most well-established. Their distinguishing characteristics set them apart from the competition.
- Kraken. Kraken is a feature-rich cryptocurrency trading platform that combines traditional exchange capabilities with forex-style trading and management. Kraken is also regarded for having some of the industry’s tightest security and is one of the few exchanges that operates a “dark pool.” Kraken was the first Bitcoin exchange to display trade volume and price on the Bloomberg Terminal, as well as the first to pass a cryptographically verified proof-of-reserves audit.
- Coinbase. Coinbase, dubbed the “PayPal of Bitcoin,” is a cryptocurrency exchange as well as a full digital wallet. Coinbase bills itself as the most popular way to purchase and sell Bitcoin in the world. In 2020 alone, it exchanged more than $195 billion in cryptocurrency.
The FinTech Future
Many investors are curious about the future of FinTech. Kalle Radage, COO of Neptune Digital Assets and former president of Payfirma, believes that FinTech startups will continue to look for ways to simplify digital payments. “Frictionless payments and banking means faster growth for businesses and better experiences for consumers,” he explained.
Many FinTech firms have been inspired by easy money transmission, which is also a result of FinTech innovation. Bill Clerico, for example, launched the internet payment service provider WePay to eliminate money-transfer friction among friends. And the enormously successful social payments app Venmo (and its business-focused Venmo for Business product) demonstrates how open people are to simple methods of money transmission.
Another FinTech field that is predicted to flourish is blockchain technology. Blockchain technology enables a more decentralized, transparent, and secure method of tracking the transaction of money and other assets, such as supply chain goods, automobile titles, and even diamonds. Virtual banking and business transactions, more methods for firms to communicate directly with clients, and faster, more economical financial services are among the other FinTech industries that will continue to flourish.
