Fintech, elaborated as Financial Technology, is the amalgamation of two intellectual terms: Finance and Technology. Fin is the short form for Finance and tech being the short form for Technology. The word basically means the use of new technology in improving and enhancing financial services. It is used in many areas of the market, be it with big companies or medium-sized firms, sole traders, or even new entrepreneurs. It caters to many industries, some of which include food, education, retail banking, investment management, Non-Governmental Organizations (NGOs), etc.
Some basic uses of fintech include depositing money online, depositing a check with your smartphone, paying for products and services using your credit or debit card, etc. The use of fintech is growing day by day, and the internet is playing a crucial role in its consistent growth.
GROWTH AND POPULARITY OF FINTECH
Automated Technology is growing by each passing day, and businesses are keener than ever to depend on computers rather than human beings. Some of the reasons behind this developing trend are more accuracy, higher productivity, cost-efficiency in some cases, and more advanced services. Hence, many businesses have started adopting this in recent years.
Technology has many advantages, and one of the most significant to-date is its use in financial services. One of the additional reasons why FinTech has gained popularity is due to the economic independence of our millennial generation. They are the cohort that has been most familiar with technology for almost their entire lives. They also want their banking services to be exceptionally digital and modern, like their other commodities and services.
Unlike their predecessors and boomers, millennials have almost zero doubts about the insufficiency of face to face interaction. Hence, all of these reasons combined have given a significant rise to the FinTech industry.
We will walk you through some of the areas of life where fintech is being widely used and also its related advantages.
- BANKING SECTOR
It has never been easier to transfer money into some other account without actually making an effort to go to the bank. Yes, this is the fintech world we live in! Almost all of the banks have some kind of mobile banking feature available to its customers now.
The rise of neobanks has also taken place, which are banks with no physical branch. Some examples of successfully running Neobanks are Chime, Simple and Varo.
- CRYPTOCURRENCY
Crypto is a digital asset designed to perform financial transactions using cryptography. It uses the secure application of fintech as everything is based online, and there is not much in-person programming to depend on.
- INVESTMENT AND SAVINGS
Online investment management services and applications such as Nutmeg make it easier for people to manage their funds, and also manage their investment portfolio. They introduce consumers to the financial market and do all the complex work for you; the only thing left is for you to make the final decision. There has been a significant increase in the shared investment and savings apps over the last decade.
- PAYMENTS
The phrase “I will pay you later” is now translated into “I will Paypal you”, using fintech. Paypal is obviously one of the many apps which allow financial payments to take place between two sources. Your money can be sent to any corner of the world in a matter of just a few seconds!
Moreover, if you have many credit or debit cards, there are applications like Curve which combine all of your cards into one Master Card that can be used all around the world. With technology, there is almost no hassle!
- LENDING
Many people can now apply for loans on their mobile phone devices, get better estimates of credit scores, and get new data points. Risk modeling has also improved, which can be helpful for lenders. Consumers can also request for credit multiple times a year without damaging their score since this process is transparent.
- INSURANCE
From mobile car insurance to health coverage, all of the information about this industry is now available on your mobile phones. This industry is advancing day by day; its involvement with technological services is the reason it still comes under the umbrella of fintech.
ADVANTAGES OF FINTECH
- Cost-effective methods: One of the most prominent ways of cost-cutting is by reducing the number of people employed. It is obvious because if you are increasing technological capital, you will eventually reduce human capital to gain efficient resource allocation. They also streamline most of the business operations and hence provide operating efficiency, besides lowering down the average and marginal costs of production.
- Improvement in the decision-making process: This is where fintech is significantly helpful by providing graphs, charts, and other statistical data to help entrepreneurs make an important decision. Besides, resource allocation can also be optimized. Businesses can even know the most effective marketing strategies, and thus can target their consumer base accordingly, instead of being in a haphazard. This way, enterprises stay more focused and informed to achieve their targets.
- Introduction of transparency: Fintech can help identify fraud, hacking, and other malicious activity faster than a human. It is extremely important for your company’s safety and integrity. Therefore, fintech can help make your businesses more secure for both yourself and your consumers, thereby increasing consumer satisfaction.
- Advantage to macroeconomy: The microeconomic practices are highly beneficial for the country’s economy. Since more resources are now being invested in research and development, so it increases the Gross Domestic Product (GDP) of a country along with Aggregate Demand (AD) as well, both of which have significant advantages. This way, the economy can be well and truly on its way to achieve the pinnacle of growth; this is how a country acquires macroeconomic benefits resulting from the microeconomic activity.
THE FINAL WORDS
The growth of the fintech industry is guaranteed, mainly because of the consistent improvements in technology sector, and partly because of the extreme dependence on financial services in literally anything today. Blockchain projects, for example, can be a catalyst in the banking industry in the years to come.
We all will probably miss receiving cash in our birthday cards because now it will just be transferred in a matter of seconds through Paypal. The time had gone when we used to wait in the queue for depositing a cheque. You can now do that from the comfort of your home. Yes, we can confidently say that times have changed, but we can assure you that it is going to get even better in the future, and this industry will flourish significantly in the years to come!