What is FINTECH?
by Idris Ewuola
FINTECH DIGITAL SUMMIT
Technology has transformed the way we do pretty much everything from shopping to socializing and it’s also turning the financial services industry on its head. Over the last few years, a crop of fintech startups has emerged, using technology to make it easier for people to invest, make payments and even get a loan.
The word FINTECH was coined from two separate English words FIN from Financial and TECH from Technology. Broadly speaking, FinTech (financial technology) is anywhere technology is applied in financial services or used to help companies manage the financial aspects of their business, including new software and applications, processes and business models. It’s also a convergence of technology and big data, enabling all sorts of companies to harness and analyze information in new ways, whether it’s coming up with a personalized investment plan or approving a loan through a different underwriting process.
What is Fintech
Fintech, or financial technology, encompasses a wide of companies using software to provide financial services. Financial technology companies are generally characterized as being startups created to disrupt existing financial models and the larger financial corporations that are less integrated with technology. Though, larger corporations (Banks and Investment firm) are increasingly recognizing the need for software solutions and are turning to fintech to increase and improve their financial service offerings.
Global investment in financial technology has exploded in recent years. Fintech now makes up a multi-billion dollar industry, still dominated by startups offering technological solutions to financial services and products.
Advantages of Fintech
Fintech has also leveled the financial playing field for everyday people, giving them access to services previously reserved for the wealthy individuals, Urban areas of a certain economic stature. Take investing in one example. Technology and data make it much easier and cheaper to bring investment advice to the masses, which means something that was geared toward a certain asset level is now open to everyone.
Or consider lending. In the past, underwriters only had a few data sets to rely on when assessing risk, which meant lots of people were turned down or charged a higher interest rate for a loan. Fintechs are relying on different information when underwriting consumers, looking at things traditional banks have never considered and providing more people with access to personal and business capital. All of that could never happen without powerful computer systems and software and data scientists who can make sense of it all.
How FinTech can be disruptive
According to the WEB, disruptive forces that have reshaped the FinTech industry include, but are certainly not limited to:
- The growth of online shopping, which is expanding quickly at the expense of in-person shopping, leading to the dominance of online, cashless solutions for transactions.
- A shifting balance of power that swings from banks and other financial services to those who own the customer experience. Banks are eliminating in-person services and looking to FinTech and large technology companies for other ways to engage customers.
- New trading platforms that are collecting data to create an aggregated market view and using analytics to uncover trends.
- Insurance products, which are becoming more tailored to customers who, in turn, are demanding coverage for specific locations, uses,and timeframes. That’s driving insurers to collect and analyze additional data about their clients.
- Artificial intelligence, which now plays a role in differentiating financial services products as it replaces complex human activities.
- Transaction process improvement and middleware, both of which remain expensive. This is pushing traditional financial services firms to consider partnerships with marketplace lenders for FinTech solutions that don’t require a full infrastructure overhaul.
Lastly the importance FINTECH, however, cannot be denied. One thing it is certain, it is not a buzzword. Fintech is an area that is radically changing how we live as a society and how we do business professionally.
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