Fintech is a term used in finance to describe any kind of technology used in various application. Any kind of technological innovation related to the finance industry is considered as Fintech. Fintech usually related to software algorithms for improving customer satisfaction, cost-cutting and process simplification. Previously, banks used to take advantage of Fintech for back end systems. And now it has become more end user-oriented applications where people can execute their financial tasks without going to a bank branch.
Fintech also includes new approaches to our financial systems which there were not existing in the 20th century. Blockchain, cryptocurrencies, online payment methods, digital banking are just common practices got involved in our modern life.
Understanding Fintech
It is any kind of innovation, how people interact with each other financially, using alternative digital currencies, digital bookkeeping etc. Previously banks use for organizing the bank and cost-cutting practices.
Now each individual uses for investment, money transferring, raising money for charity and funding their company.
Fintech is an innovative perspective of the finance industry. It has been changing people’s life and financial interaction with each other. Previously, there were limited financial options for sending money, financial investment instruments, private retirement plans and bookkeeping. Those uses might be costly for many small and medium-size enterprises back in the day. This also leads to weak process improvement, week system automation and repetitive workload for employees that cause boredom of work and less efficiency at the workplace. By the development of smart mobile devices, we can pay our vacation or tracking a personal budget with a couple of tab on our smartphone.
According to EY’s 2019 Fintech Adoption Index, 96% of global consumers are aware of at least one money transfer and payment FinTech service, 33% of consumer adopters turn to someone other than their main bank first. 3 out of 4 of global consumers use a money transfer and payments FinTech service.[1] This number is still expected to grow in the next decades.
With a significant depth of five continents and emerge of innovative demands are parallel to our interconnected boundary-free world. The need for innovation in the financial sector, insufficient solution rate from established financial enterprises lead the startups to triggered disruption in the financial world. This convergence of the financial services industry and transformative technologies, commonly known as FinTech, is reshaping the landscape. This transformation is more significant to witness in areas including:
Artificial intelligence
Blockchain technology
Crowdfunded investment
Digital asset management
ePayments
Money services transmission
Payment processing technologies
Peer-to-peer lending
Robotic investment advice
Corporate transactions
Cybersecurity and incident responses
Anti-money laundering and sanctions
Insurance and risk management
One innovative example of this new interrupting approach is Friendsurance. Friendsurance is the first Pear to Pear insurance solution which helps customers to understand their fit insurance solution by comparing multiple solutions. This helps users to save more time, money and experience more user-friendly insurance issue.[2]
On more B2B side Open Data Nation creates the opportunity to insurers to prioritize their customer as they wish to underwrite while eliminating high-risk options. This is possible by utilizing aggregated information sourced from 2.5 billion public records in the U.S.[3]
Fintech’s Expanding Horizon
Fintech was meant to banks only back end process improvement back in the days. However, we see significant challenges and changes ahead of us. Fintech is branching out in other industries such as crowdfunding, insurance, cryptocurrency and mobile payment apps. Covid-19 is one of the major events in 2020 whereby human to human contact is limited, online payment has become daily life practice for many of us. E-wallets, online shopping, contact-free payment methods through NFC have skyrocketed. For example, more than two-thirds of digital buyers in Canada chose to pay by credit card when shopping online during the outbreak, while UK buyers preferred debit cards and those in Italy opted for digital wallets like PayPal. Payment security was the top criterion applied by online shoppers when selecting their top payment method, according to an April 2020 survey conducted by Research And Markets.[4]
Though the finance industry is one of the most densely regulated, we have still experience mishaps via cybercrimes, security risks, privacy concerns. Such risks will require more inspection by the lawmakers. Furthermore, this brings the new regulation requirement for new Fintech development in order to sustain privacy concerns, fair competition among players in the market.
The future of Fintech and banking industry leans on implementation of agile technologies, which helps companies to cut costs. These technologies should also consider data privacy and security of the customers. Companies who need to stay ahead in the competition requires to implement robust policies, protect customer interests more than before.
Article resources
[1] EY Global Fintech Adoption Index 2019
[2] Friendsurance Business | Digital Bancassurance Platform
[3] How insurtechs are transforming insurance underwriting — 7 examples — Accenture Insurance Blog
[4] Global Online Payment Methods 2020 and COVID-19’s Impact (researchandmarkets.com)
