FinTech is a portmanteau for “financial technology.”
Everything these days is going up into the cloud. You do not have to go to the electronics store, because there is Amazon. Banks are no longer an exception. Before the advent of FinTech, you had to go to banks to secure loans and credit lines, but it’s all changed now.
How did it come about?
Consumers lost interest in banks and money lenders after the financial crises. Simultaneously, however, cloud computing was making it easier for people to set-up tech companies. This set the scene for the rise of FinTech. FinTech entrepreneurs received a warm welcome from millennials. Soon enough, FinTech start-ups started sprouting up. Initially, they were only found in major cities, which included New York, California, Berlin, London, and Shanghai.
Seeing the success of these start-ups, mainstream banks also sprung into action. The first FinTech app that became mainstream was Venmo – the money transfer app. Even Goldman Sachs announced a mobile banking app called Marcus. A Bloomberg article stated that FinTech could replace 30 % of banking jobs by 2023.
FinTech Company Definition
From credit cards to personal finance apps, the financial sector is not a stranger to technology. And now, the purpose of FinTech is to make the financial sector more efficient and safe. To achieve this, FinTech companies use AI, data science, and blockchain technologies.
How does it all work?
Some of the latest trends include using machine learning to process credit risks. Moreover, machine learning, blockchain, and artificial intelligence technologies are now managing hedge funds.
Applications of FinTech
Here are some applications of FinTech:
Mobile Banking makes up a large chunk of the FinTech companies. So, demand for such applications is high because of the ease of access they offer, and even most banks now offer an online banking app.
Cryptocurrency is probably what gave FinTech its rise to stardom. A purist would argue that blockchain and cryptocurrency are not part of FinTech. However, these work hand-in-hand.
Savings and Investment apps have witnessed a huge surge. Companies like Stash and Atom have broken the barriers of traditional investing. Most apps are different in one way or the other. However, all of them use a combination of some form of saving and small-amount of investing.
Trading and Machine Learning is a match made in heaven. This technology can predict trends and risk by processing large amounts of data. The profit potentials are huge for this technology. Nonetheless, it is still far away from replacing the Wall Street traders.
Lending companies in FinTech are revolutionizing the lending system. Using AI and Machine Learning algorithms, they can predict credit risks. As a result, loan approval times have significantly increased; as a result, people can apply for loans sitting in their armchair at home.
Insurance technology or InsurTech has become an industry. However, insurance companies have been slow to adopt the technology. For example, Insurtech companies are collaborating with health insurance companies to promote wearables.
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