Fintech is defined as computer programs and other technology used to facilitate banking, financial services and payments.
Fintech often refers to the incorporation of technology into services by finance-oriented companies to expand, enable, and enhance the services they provide to their customers.
Think about the life before COVID. There was no social distancing and no restrictions on going out or shopping from brick-and-mortar stores. From restaurant or grocery bills to uber ride payments, people used to complete all transactions using their mobile phones or credit cards.
Fintech has become a big part of our everyday lives – whether it’s about depositing your paycheck to your bank or splitting your restaurant bills. Fintech adoption has grown rapidly. A 2019 report by Statista shows that 75% of people in the world have adopted some kind of Fintech service. The global Fintech adoption rate was 64% in 2019, in which 3 out of 4 adults used online payment or money transfer services, according to the Global Fintech Adoption Index.
Fintech is often seen as an ambiguous concept since financial technology is one broad term that covers banking, insurance, transportation, and other sectors under one umbrella. If you are still wondering what is Fintech, what is fintech stock, and how is this industry dominating the current business market, read on.
What is a Fintech Company? Which Industries are a Part of Fintech?
A Fintech company develops and introduces new financial technology that can streamline the delivery of financial services. Technically, Fintech aims to make the lives of small and large-scale business owners and customers easier by providing them with smart and better financial management tools. This innovative technology helps in the management of complex financial tasks – from processing payments to conducting online banking.
FinTech stands for Financial Technology. Initially, the term was used to indicate the technology implemented at the back-end units of a financial company. It has witnessed many developments since its launch. Today, Fintech has become a comprehensive solution that offers customer-oriented services, covering education, retail, banking, hospitals, and nearly every industry. The use of cryptocurrencies for trading and online payments also falls into this category, and while Bitcoin and other cryptocurrencies are making headlines today, the global banking sector is still the leading market for Fintech.
Any technology that supports digitized services and disrupts traditional methods of operations is considered a part of this big innovation. It is mostly the software and algorithms that run on your PC and smartphones to enable convenient digital operations. It could also involve hardware tools, such as smart piggy banks or online VR platforms. Thanks to Fintech, we are able to process tons of transactions with simple clicks today. Whether you are buying groceries or exchanging crypto coins, all you need is a mobile to process any financial transaction seamlessly.
So, How is it Evolving?
The above stats show how huge the Fintech industry is and how it is expected to keep expanding at a rapid pace. One of the many reasons for the exponential growth of this industry is the traditional banking sector adopting Financial Technology. The banks are not only embracing the technology, but they are investing in the Fintech stocks and collaborating with the Fintech startups to provide customers with a digitized banking platform. It is also easier for banks to stay relevant and keep growing in this fast-paced business world.
Fintech is not new or modern. In fact, it has been there for many decades, it is just that this industry has grown so fast in the past few years that everyone has noticed this rapid evolution. From credit cards launched in the 1950s making transactions smoother and faster to the e-wallets that enable contactless payments, technology has witnessed an incredible transformation in the banking industry.
The growth of fintech has also led to growing concerns around cybersecurity in the tech world. As more and more people are relying on digitized banking solutions, the risk of online fraud has grown rapidly. This industry has become a new target of cybercrime. Fortunately, the cybersecurity protocols are also developing at a fast pace and the security industry keeps launching robust solutions to mitigate the security risks.
How Does it Help Small and Large-scale Businesses?
Fintech was a savior for banks and other financial service providers in the COVID pandemic. While the banks were physically closed, people could exchange cryptocurrencies and make payments using digital banking. Fintech has revolutionized the way we carry out our day-to-day activities. For example, you no longer need to wait for days and weeks to get your credit score report. Similarly, you can send payment internationally within seconds. Technology has not only accelerated these financial processes, but it has made them safer and a lot more convenient than traditional financial services.
Fintech is mostly the combination of algorithm-based services and brokers. But as the technology is progressing, it’s only a matter of time before we will see a phase where users can streamline their complex financial tasks without having to interact with an agent or broker. Take the investment industry, for example. The investors do not have to meet the financial experts or the startup founder in person to understand their ideas. Investors can go over their profiles digitally and interact with a chatbot (if required) to make an informed decision. What could be a better example of Fintech evolution than the emergence of Robo-advisors?
These digital tools are smart enough to help people make investment decisions and financial plans without any human intervention. There are many fintech mobilizing solutions designed to keep businesses alive and running in the middle of the global pandemic. These services have enabled businesses to continue selling products and services digitally. Take Paytrace, for example. It has helped many businesses thrive globally by enabling contactless payment.
People are investing in Fintech stocks to grow their money. Nasdaq, Visa, Robinhood, Coinbase, Goldman Sachs, and Fiserv are a few popular names in the Fintech world that are growing rapidly. No one knows the future of fintech, but if the predictions from financial and IT experts are to be believed, the payment and online transfer services will witness a massive adoption in the coming years.