Fintech, as the word constitutes, is a combination of two words, finance and technology, basically meaning Financial Technology. With the ongoing upsurge in technology and the financial market touching its peak, Fintech is a revolutionary experience, a technical tool to support financial services. Fintech is a term coined to refer to the constant innovations and hybridization in the financial and technological space, as well as services and companies that utilize technology to provide financial services to its customers, businesses, and beneficiaries.
With its massive success over the last decade, Fintech is one of the most important and fundamental attributes in today’s finance and economy. Initially designed to be used in back-end systems of prominent financial institutions, Fintech saw a colossal rise into the financial services sector, improving the industry itself and automating the delivery and use of the financial sector.
When we talk about technology, Fintech comprises using the internet, mobile devices, software technology or cloud services to perform or connect with financial services. It may as well include services from softwares, mobile payment apps and cryptocurrency. The term isn’t confined to consumers’ finances, but is also applied in the business to business (B2B) market.
Fintech is a great helping hand to its customers, companies and business owners, as it eases out their financial operations by connecting various algorithms and software that were initially used in computers, gradually transitioning into smartphones.
A few days back, a friend asked me “What is Fintech?” to which I said that it is basically making life easy for everyone on this planet to attain financial services as basic human rights and molding technology into the betterment of the entire financial sector.
The word “Fintech” actually appeared into the Oxford dictionary and is defined as “Computer programs and other technology used to support or enable banking and financial services”.
Now, let’s talk about the importance of Fintech for successful businesses and why it is a step towards the future. Fintech has effortlessly transitioned from customer-oriented services to industries such as education, fundraising, retail banking, nonprofit, obtaining loans, etc.
While the idea of Fintech may seem obscure to many and with its ever-so-exploding definition, Fintech has managed to create universal access, thanks to the power of technology and the internet. When we talk of Fintech in relation to businesses, there are two keywords to be highlighted, accessibility and speed.
Fintech is a sort of panacea, a cynosure that stands right at the center, providing equal opportunities to thrive businesses. It is hard to sum up its entire contribution to businesses in one blog, however, let’s focus at the core.
Earlier, I mentioned accessibility and speed, and Fintech provides various benefits to its variety of customers such as assessing risk more smartly by identifying the success rate of small-scale businesses and scanning a company’s large range of information. Other factors include investment by crowdfunding, allowing normal citizens to contribute to various campaigns and fundraisers online. Businesses also value cryptocurrencies such as Bitcoin, which are being used in high ratios, raising the sales of goods and services. Accessibility and speed play a part in each of these factors.
Fintech means real-time updates and overview of big-data, which allows businesses to gather unparalleled insights, “permitting savvy businesses to consistently update their marketing on the fly and take advantage of encouraging conditions”, as stated by a professional. Businesses now have the audacity to purchase the feature-rich, complex software suites, which would have cost them a fortune a decade ago in its setup, equipment, program license, trained technicians and an entire IT team to look after the whole setup.
The factors above denote that businesses are now able to provide enhanced, cheaper, and up-to-date services to their customers. The adoption of smartphones, new and innovative software designs and great internet bandwidth has also vastly improved customer experiences, escalating the ease to reach financial information and transactions to a level never touched before. This has also led to an amelioration of omnichannel payments processing, mobile banking, peer-to-peer payments, and new ways of evaluating credit applications.
It is clear as daylight that SMEs face major difficulties in order to secure the financing they need, and they require more economic growth as compared to well-established firms. Here lies the importance of Fintech, which provides SMEs with its innovative products and a variety of rich funding options.
The CEO of the Dutch development bank FMO Peter van Mierlo in his opening address of the “Fintech for Inclusion Global Summit” in February 2019, asserted that: “Fintech has a key role to play in reducing poverty, creating jobs, increasing gender equality and improving food security. It will also provide better data and as a result, decrease the perceived risk profile of the frontier countries, which will lead to more capital for the underbanked. In short, fintech can bring economies to life.”
Fintech is a force to be reckoned with for future businesses. It helps them improve their models and verticals such as lending process, wealth management or any such finance-related activity.
Fintech is all around us in 2020, and below I am going to mention some of its traditional use and what makes it an impactful driving force:
- Crowdfunding Platforms
- Blockchain and Cryptocurrency
- Mobile Payments
- Insurance and loans
- Robo-Advising and Stock-Trading Apps
- Budgeting Apps
- Digital Wallets
- Rise of Millennials
To sum up, it has opened up various possibilities and an exciting world of opportunities for businesses. It has been around since the 1950s, but it is now more dominant than ever. The inclusivity of technology in our lives has made fintech an indispensable part of modern banking. The wheels are turning, if we are smart enough to take advantage of it, we’re in for a treat provided by the volatility of change.