Fintech, which some professionals express as “FinTech,” is short for financial technology. It’s a term that reflects new innovations in facilitating monetary activities used by businesses, investors, and consumers. This emerging technology is considered disruptive because it competes with traditional methods of delivering financial services. Here are essential points to know about how smart technology in Fintech is changing financial processes.
Related: Trends in FinTech That Are Here to Stay
What Fintech Means
The financial industry has seen significant changes from technological advancements over the last century:
- The telegraph and telephone allowed stock purchases across international borders.
- The shift from analog to digital moved consumers from cash and paper checks to cards.
- ATMs and online banking removed the need for tellers and enabled access to financial services from home.
The recent introduction of distributed ledger technology and crypto is ushering in yet another shift in the financial industry. Fiat money and traditional loans are being replaced by decentralized digital currencies and peer-to-peer lending solutions that are faster, cheaper, and more accessible to consumers and investors.
It’s important to note at this time Fintech has a very wide definition that encompasses any new digital technology that improves financial services. It typically involves solutions that are customized for a specific purpose with the intention of enhancing a company’s business model. Mobile devices are vital to Fintech solutions, allowing users to make transactions from any location at any time.
One of the most popular examples of a Fintech company is PayPal, which has been around for over two decades. PayPal introduced consumers to digital cash, creating new conveniences beyond ATMs. Some of the most essential functions of Fintech involve the ability to automate investments, banking, and risk management strategies. Not all traditional financial institutions have adopted this new paradigm, but more forward-thinking banks have embraced it.
Firstmac is a Fintech company based in Australia with the goal of competing with traditional banks by providing more affordable loans with lower interest rates. Based on smart technology, the firm can provide the same services that major conventional lenders provide, but at lower costs. Most of today’s Fintech companies are based in Asia, although the number of players is growing in the United States.
Keep reading: The Role of Fintech in Banking: What Does the Future Hold?
Advantages for Small Businesses to Embrace Fintech
Fintech startups typically begin with high upfront costs then lower costs for growing a customer base. The technology has experienced the most growth in China and India, as up to 80 percent of Chinese consumers have adopted at least one Fintech service to make mobile transactions. Many consumers around the globe embrace these services to either save or invest cash.
If you can afford building a business based on smart technology in Fintech, you should look into the following cutting-edge technologies that are part of the disruption:
Blockchain – This digital storage and cybersecurity technology has been around for over a decade. It allows for private parties to make secure online transactions that are displayed on a public ledger while the private details must be unlocked with an encryption key. Blockchain is used for cryptocurrency trading, but it can also be utilized to improve many traditional financial processes.
Internet of Things (IoT) – Wireless sensors placed in objects can transmit data through the internet at rapid speed. IoT devices are now the key to delivering streams of real-time data about system processes to analysts. The more IoT devices used in a utility or manufacturing plant, the more the organization can pinpoint waste and make real-time adjustments.
Augmented Reality – As a subset of artificial intelligence, AR mixes the physical and digital worlds to provide data and image overlays on top of screen viewing. Innovative financial firms are providing 3D virtual experiences with modern workstations. This effect makes it quicker to sort and comprehend financial data. The combination of AR and automation software can boost financial accuracy and business productivity.
Be aware that the current broad definition of Fintech includes software, services, and companies that provide new technology to improve financial processes. Overall, Fintech equates to game-changing financial technology that contributes to cost efficiency.
Read more: IoT and the Evolution of Smart Banking
The increase in fintech products and services will be a driving force of transformation in the financial industry over the next decade. Startups and businesses that embrace these technologies will have a chance to outshine competitors and capture a new and growing market of tech savvy investors and consumers.