Whether buying coffee at a local coffee shop or managing finances, financial technology is all around us. Fintech has been used in many of the latest technological developments-from payments to cryptocurrencies. Fintech combines the latest technological developments with financial services or applications to help companies (mainly start-ups) disrupt the industry and provide better financial services for companies and individuals. But what exactly is fintech and how is it used?
What Is Fintech?
Fintech is a term used to describe financial technology. The industry covers any type of technology in financial services-from companies to consumers. Fintech describes any company that provides financial services through software or other technologies, including anything from mobile payment applications to cryptocurrencies.
Broadly speaking, financial technology describes any company that uses the Internet, mobile devices, software technology, or cloud services to perform or connect to financial services. Many fintech products are designed to connect consumers' finances with easy-to-use technology, although the term also applies to business-to-business (B2B) technology.
Fintech has made progress in dozens of applications and has changed the way consumers access finances. From mobile payment applications to insurance and investment companies, fintech has disrupted traditional finance and banking - and may pose a threat to traditional banks or financial institutions.
Initially, fintech referred to technologies applied to the back-end systems of banks or other financial institutions-but later evolved to include a large number of other more consumer-centric applications. In 2020, you can use this technology (usually on your smartphone) to manage funds, trade stocks, pay for food, or manage insurance.
The tools provided by fintech are changing the way many consumers track, manage and facilitate their finances. In fact, according to 2016 data, people use one to three applications to manage their finances.
For an estimated near 2 billion people worldwide who do not have a bank account, fintech provides a flexible option to participate in financial services without the need for a physical store. And, to a large extent, this is exactly the purpose of financial technology development-to allow consumers to directly enter their financial life through easy-to-use technology.
But besides budget apps, what other uses of fintech are there?
Fintech Examples
So how is fintech being used, and what are some of its traditional cases?
Crowdfunding Platforms
Companies such as Kickstarter, Patreon, and GoFundMe showcased the scope of fintech beyond traditional banking.
Crowdfunding platforms allow Internet and application users to send or receive funds to others on the platform, and allow individuals or businesses to pool funds from various sources in the same place.
No need to go to traditional banks to apply for loans, now you can directly seek support from investors for projects or companies. Although their applications range from funding from family and friends to funding from fans and patrons, the number of crowdfunding platforms has doubled over the years.
Blockchain and Cryptocurrency
Cryptocurrency and blockchain are iconic examples of financial technology.
Cryptocurrency exchanges such as Coinbase and Gemini connect users to buy and sell cryptocurrencies such as Bitcoin or Litecoin.
But in addition to encryption, blockchain services such as BlockVerify help reduce fraud by storing provenance data on the blockchain.
While cryptocurrency and even blockchain may be somewhat controversial uses of fintech, they have certainly taken parts of the investment world by storm in recent years.
Mobile Payments
It seems that everyone who owns a smartphone uses some form of mobile payment. In fact, according to Statista, the global mobile payment market is expected to exceed US$1 trillion in 2019.
Using increasingly sophisticated technology, services have emerged that allow consumers to exchange currency and pay online or on mobile devices.
Apple and Alibaba have entered the mobile payment business through Apple Pay or Alipay.
Insurance
Fintech has even subverted the insurance industry. In fact, insurtech (as it is called) has covered everything from auto insurance to home insurance and data protection.
In addition, insurtech startups are increasingly attracting funds. According to CNBC, insurance startup Oscar Health received approximately US$165 million in funding in March last year, valued at US$3.2 billion.
In addition, according to Forbes 2019 data, the popular personal finance company Credit Karma is valued at US$4 billion.
Robo-Advising and Stock-Trading Apps
Robo-advising has improved efficiency and reduced costs by providing algorithm-based asset recommendation and portfolio management, thereby disrupting the asset management industry.
Since the rise of more advanced technologies that can analyze various portfolio options 24/7, financial institutions have adapted to provide online robotic advisory services-including Charles Schwab (SCHW)-Get Charles Schwab Corporation Report and Vanguard.
In addition, other popular robo-advising services include Betterment and Ellevest.
Perhaps one of the more popular and significant innovations in the financial technology field is the development of stock trading applications. In the past, investors had to go directly to stock exchanges such as the New York Stock Exchange or Nasdaq, but now, investors can buy and sell stocks with just a tap of a finger on a mobile device.
With advanced trading platform like CryptoCortex, ExecutionServer, and trading system for automated market making, hedging and arbitrage of digital assets as MarketMaker investing from anywhere and on any budget has never been easier.
Budgeting Apps
One of the most common uses of fintech in 2021 is to budget apps for consumers, and the popularity of these apps has grown exponentially over the years. Previously, consumers had to create their own budgets, collect checks, or browse Excel spreadsheets to track their finances. But after the fintech revolution promotes the development of financial services applications, consumers can easily and effectively track their income, expenditures and other budgeting tools, which have completely changed consumers' perception of money. Budgeting applications such as Intuit's Mint can help consumers track their income, monthly payments, expenditures, etc. on their mobile devices.
Fintech Stocks
There are many exciting fintech stocks—whether they are newbies in the market or real staples that have been tried and tested. PayPal has long been a favorite on the market. In fact, as of the end of 2018, PayPal had approximately 267 million users worldwide-an increase of approximately 31% of its accounts this year.
But in addition to mobile cash applications, there are several other fintech stocks that have attracted the attention of analysts.
Visa is now being considered in the field of financial technology, and given the company's increasing shift to plastics and technological advancements, analysts seem to be optimistic about the stock's potential.
And, of course, the Chinese giant Alibaba has always been a large fintech stock worth knowing about - and possibly owning. Rob Sanderson, an analyst at MKM Partners, said last year: "Alibaba has been ahead of any competitor for several years in advancing the development of digital commerce."
In addition, Zelle-a person-to-person (P2P) application developed in response to cash applications such as Venmo-marks the banking industry's retaliation against fintech startups. The Zelle platform is supported by many banks, including heavyweight banks such as Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, Bank of America, and Wells Fargo.
Although many of us may have one or two budget apps on our phones, who are the other users of fintech? How are fintech used in different ways?
Who Uses Fintech?
Last but not least for this article, who are the other users of fintech? How are fintech used in different ways?
B2B (Business to Business)
Before the development of financial technology, companies would go to banks to obtain loans and financing. But with the advent of financial technology, companies can easily obtain loans, financing and other financial services through mobile technology.
In addition, cloud-based platforms and even customer relationship management services such as Salesforce provide B2B services, allowing companies to interact with financial data to help improve their services.
B2C (Business to Client)
Of course, fintech has a lot of business facing customers or B2C applications. Cash applications such as PayPal, Venmo, and Apple Pay all allow customers or customers to transfer money via the Internet or mobile technology, while budget applications such as Mint allow customers to manage their finances and expenses.
Most of the banking industry's first attempts at fintech focused on B2C applications, such as loans and payment services.
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