Financial technology has actually been around for a long time. When we buy something, many of us are already using fintech instead of cash anymore. Many use it to carry out various financial transactions in a way that is much more convenient than before. Fintech will continue to transform our society now and in the years to come.
What is Fintech?
Fintech (Financial Technology) is a term that describes a new group of financial technologies designed to enhance and automate the use and delivery of financial services. It is changing the way we save, borrow, and invest money by making digital financial transactions easier and simpler, without need conventional bank.
Financial technology applies to any innovation that involves financial transactions, be it personal or business use. Initiated by the birth of credit cards (1950s) and ATMs (1960s).
There used to be a time when fintech was only concerned with the back office operations of banks or stock trading companies. The boom of the Internet and the rise of mobile computing have propelled fintech into a continuous global revolution.
Currently, fintech has indeed taken up an important space in today’s digital world. With a growing family of powerful technology tools for personal and commercial finance, it is poised for ever growing use and impact.
Finally, a cashless society?
Fintech will play a vital role in making a moneyless world a reality. Given the fast pace with which technology is changing the world of finance, further fintech developments are likely to bring major improvements to business and finance. And now in Indonesia there is also a buzz about digital wallets or e-Wallets to replace non-cash transactions, you can read my previous article about The 5 best digital e-wallets in Indonesia.
Before fintech reaches any further milestones in the near future, it’s good to know what is important about this amazing technology. Whether we like it or not, many of us have used some form of fintech without knowing much about fintech beforehand.
Different types of fintech
Fintech is defined as an organization that combines business models and innovative technology to enable, enhance and disrupt financial services. Here are the main categories of fintechs today, based on their current ability to make a real contribution to making financial transactions easier.
The payment gateway’s most prominent contribution is that they allow people to send money without needing a bank. By eliminating expensive bank fees, payment gateways have provided consumers with many benefits and savings.
Apart from these advantages, fintech also enhances the security aspects of online payment gateways. For example, fintech is developing a blockchain-based system to make electronic money transfers safer and more cost-effective, compared to conventional banks.
With 5.11 billion unique mobile users worldwide, it’s no surprise that global mobile payment transactions will be worth more than $ 1 trillion by 2019. By 2023, that figure is expected to exceed US $ 4.3 trillion.
It’s no wonder fintech companies are constantly improving their products and services to better serve consumers everywhere. Advances in mobile wallet technology, digital authentication, and NFC are at the forefront of these developments.
If a cashless society is something that is impossible to achieve today, a world without credit card physical will happen soon.
Have you checked out today’s best mobile payment deals? It’s good to try some of them as fintechs tend to keep rolling out new features regularly.
Average people take the time – often in a quiet area of their home – to calculate their expenses and make a budget accordingly. Monitoring finances usually involves navigating through spreadsheets and rummaging through paper receipts and checks.
Today – thanks to budgeting apps – monitoring expenses and planning a budget has become easier and more efficient. In fact, one of the most used fintech offerings to date is a mobile budgeting or financial management app.
For both personal and business purposes, budgeting apps allow anyone to easily effectively monitor expenses, income and other finances. This amazing application has completely changed the way consumers view and conduct their financial activities.
Another fintech category that has taken the world by storm is consumer banking.
As of today, about 1.7 billion adults remain without a bank account or access to a mobile money provider. This is mainly because conventional banks have operated in ways that have marginalized many poor people.
High bank fees, for example, make it impossible for many people to use their services. Fintech’s alternative consumer banking products and services are designed to address this longstanding problem. By making financial products more accessible and affordable, fintech companies are providing better alternatives for consumers.
There are many examples of innovative fintech banking. From mobile banks to online digital banks, fintech banks are transforming banking as we know it today.
Robo-Advising and Stock-Trading Apps
In recent years, robotic advisory has transformed the asset management sector. This innovative fintech service uses smart algorithm technology to provide intuitive asset recommendations.
Advising Robo, in effect, portfolio management has achieved unprecedented efficiency, including lowering costs. Financial advisors can now analyze multiple portfolio options more efficiently, 24/7, simultaneously. Unsurprisingly, more and more robot advisory services continue to emerge.
Another popular and highly innovative contribution of fintech is the invention of stock trading applications.
In the past, investors had to physically visit stock exchange companies to buy and sell shares. Today, stock trading solutions allow investors to easily trade stocks easily on their smartphones.
With the cheaper and minimum stock trading app on the market, investing has never been easier. Thanks to this fintech innovation, making stock trading applications can now be done anywhere, without budget constraints.
Fintech companies have also entered the large insurance market, but offer better service than conventional insurance companies. Most of the insurance companies are involved in distributing insurance.
Insurtechs optimizes the use of innovative insurance applications to get more people insured. Like it does in other industries, fintech is making insurance more accessible to the underserved masses.
Companies in this category usually collaborate with conventional insurance companies to automate insurance procedures and expand coverage. Insurtechs has many areas to innovate, ranging from wearables to life insurance and health to cellular care insurance.
What is important for insurance innovation is to eliminate a complicated and time-consuming process. With fintech-provided insurance, anyone can buy now car insurance in just a few hours.
Blockchain and Cryptocurrency
Is blockchain fintech? Of course yes. In fact, if there are any fintech innovations that really stand out from the rest, they have to be blockchains and cryptocurrencies. This is because this new technology offers huge potential to significantly improve various industries.
Blockchain uses encryption technology to create cryptocurrency, a promising new medium of exchange that is safer and better than cash. As a result, blockchain offers huge possibilities to disrupt and change conventional business models.
In fact, leading organizations from various industries have achieved significant benefits from blockchains and cryptocurrencies. These include reduced costs, faster transactions, increased efficiency, better traceability, increased security, and increased transparency.
The blockchain application that has emerged is a smart contract or smart contract. These are digital, self-executing contracts that can electronically facilitate, verify, and implement agreements. Experts say that these blockchain products are likely to change the way of offering in the future.
Peer-to-peer Lending / Crowdfunding
Fintech is changing the way equity financing is also done. These innovative companies are showing the world an alternative, easier way to raise money. This approach enforces how to effectively conduct financial transactions outside of traditional banking.
Several fintechs in this category seek to align investors with viable startups. Others implement virtual fundraising to facilitate new business investment.
Crowdfunding networks allow users to receive or send money online or via mobile applications. They allow a business or individual entrepreneur to easily use a single location to raise funds from multiple sources.
It is now possible for startups to directly reach out to investors for support rather than trying to get a loan from a conventional bank. You can also use a donor management app to allow for better handling of P2P loan transactions.
And that’s a complete explanation of what Fintech is and some types and examples of fintech that you need to know. Hopefully this article is useful and adds to your insight. 🙂