What is FinTech and Why is it Important?

Fintech companies are flourishing with innovations and there are newer ideas getting shaped into apps. Now, the role of Fintech has become more defined, reasonable, and vital. If you think you can’t keep up with all financial buzzwords from Ethereum, and Bitcoin to NFTs, then don’t panic, you are not the only one. The ever-growing spur of Fintech has been continuously innovating to develop customized financial software solutions. Everything you do, even the smallest financial transaction highly defines the value of fintech within businesses.

Fintech cannot be taken as just another innovation, it is here to stay, innovate and change the current way of operations. Thus, this necessitates us to have a good understanding of financial services, mobile payments, online trading, mobile banking, payment methodologies, third-party app integration, secure payment services, and similar other needs. Don’t be afraid, you will get to know about each of these in this blog. But, firstly let us start with the basic question- what is Fintech?

1. What is Fintech?

Fintech or financial technology means offering financial services over the internet. Everything right from mobile banking apps to mobile payments apps, blockchain and cryptocurrency, stock trading, etc can be included in this fintech innovation.  In simple words, every business can use fintech for their  services and enhance or automate their work and procedures. Wondering why? Because with this you can simply offer exclusive financial services to both businesses and consumers at once.  

Fintech is a phrase that’s definitely not a short-term buzzword and whose significance can not be denied. Over a few years, a radical change has been observed in the way we manage our business and even personal finance  – all thanks to the ever-growing financial technology company. Here’s what Google Trends report is showing us about Fintech search term.

Along with this, more and more fintech(financial technology) companies  are found making financial services more accessible to the general public. Everything from those traditional financial transactions, such as investing, saving, and loan processing, are also included in these digital financial services. Take a look at the CNBC report on Fintech.

In layman’s language, this one seems to be now making a million-dollar industry. With this, we can assume that fintech as a service is quite a powerful and money-minting financial services industry if you know how to take a lead. Also, you are halfway done when you realize and act upon utilizing the best from the Fintech companies .

2. Examples of FinTech

Since we have covered the basics of fintech now it’s time to be precise. Can you name me two or three top fintech companies? Wealthfront, Personal Capital, Kabbage are the ones to top the list at present.  All of them have significantly been offering unmatchable fintech services to the financial services sector and retail banking industry. For better understanding let us go through these common yet important examples of fintech. 

2.1 Online and Mobile Payment Systems

There is no denying the fact that Fintech companies have  made some significant changes in the way we buy and sell products – both as businesses as well as individuals. Conducting transactions via smart devices and computing systems was a pure myth at some point in time and today it has become a reality. 

Today if you ask anyone whether he is a 35-year-old job worker or a college-going kid or a 60-year-old retired businessman, how would they like to make payments? They would say by using mobile payment apps be it Google pay or Whatsapp payment or anything else.  In India, our own IT minister Ashwini Vaishnaw uses his twitter handle to broadcast the rise of UPI payment which is one of the online payment method.

🇮🇳 records 6 billion UPI transactions in July. pic.twitter.com/QL8O95jEWf

— Ashwini Vaishnaw (@AshwiniVaishnaw) August 2, 2022

The cash-based society seems to be doomed, which is not a problem at all. Because these online transactions have led to several benefits such as corruption has decreased, a few underdeveloped banking sectors have gained momentum, managing finances is no longer rocket science and whatnot. 

2.2 Trading

Of course who doesn’t believe in trading and investment. After all, this is one of the sure-shot and safest ways to multiply your money in the least amount of time. With the rise in fintech, by using emerging technologies such as Artificial intelligence, Machine learning, natural language processing, DLT(Distributed Ledger Technology), big data, gaining relevant insights is no longer difficult. 

Also, you will come across a rise of wide range of stock trading apps where not just transactions can be carried out but also assets can be managed easily.  Take a look at the glimpse about rise of online trading from Statista.

2.3 Blockchain and Cryptocurrency

The list is definitely incomplete without Cryptocurrency and blockchain. Buying or selling bitcoins have now become a new norm to reduce fraud or faulty transactions and safeguard the financial data on Blockchain technology.

Have you heard about libra? It is Facebook’s digital currency. So you see the concept of cryptocurrency is not slowing down. 

2.4 Crowdfunding Platforms

First, what are these crowdfunding platforms? These platforms enable internet or app users to send or receive money from different digital platforms at the same time. Yes, you are no longer required to beg in front of conventional banks for loans, all you have to do is find investors who are ready to support you, and your work is done.  

GoFundMe and Kickstarter are certain examples to take into consideration here. Whether you want to pay hospital bills or travel or conduct fundraisers or any such charitable events, crowdfunding platforms can be extremely helpful. 

2.5 Insurtech

Lastly, we have Insurtech. Fintech is not just limited to the financial institutions or the banking industry, it has created a huge impact on the insurance industry  as well. Insurtech is the name being reckoned with again and again. And why not since this one has left no stone unturned in maximizing savings. Here’s what Grandviewresearch observed about Insurtech Market in US.

More and more fintech companies are found collaborating with insurance companies to streamline procedures and enable them to focus on other interesting aspects.  

3. Why is Fintech Important?

Businesses are no longer limited to implementing old-school ways or conventional ones, all thanks to the fintech revolution. Today one is surrounded by a plethora of alternatives and options ranging from crowdsourcing to net banking to mobile payments. More or less, unlike earlier, now anyone can set up his or her own business in no time with the help of fintech. 

For those who don’t know what Crowdsourcing is? By using such financial services anyone can create instant plans on how and most importantly where to get finance from.  Here you don’t need to meet others in person. Instead of spending so much time convincing your investors today, businesses can pitch seamlessly.  

Transferring money across borders was a curse earlier! Time to get acquainted with TransferWise – the innovation which turned the table entirely. Not just large enterprises but even startups are found moving cash conveniently at cost-effective rates. 

you won’t find the post convincing till I don’t provide some accurate reasons stating how important the Fintech software is. So without any further ado, here it goes! 

3.1 Financial Services are Pretty Cost-Effective

Of course, you are well-versed with the fact that global payment services have proven as a pure blessing for a plethora of communities. But what you may not know is that global remittance is a costly venture and not every business has the potential to afford it. 

Moreover, each time you transfer the money the processing fees automatically fluctuate. Using Fintech services, businesses could save from charging these unnecessary fees.  There are a plethora of financial tools available. So, one no longer has to worry about any cancellation fees or any other hidden charges, they can send or receive money across the world instantly in different currencies through mobile devices. 

Lastly, can anything think of integrating physical and digital payments? Well, now this is a reality where multiple bank accounts are using a single interface. And you know what is the best part? This fintech software is beneficial for consumers as well. 

Atom is the best example I could think of as of now. 

3.2 Compliance + Security = Fintech

Many of you might not agree that Fintech is highly safe in regards to security. Fintech is much safer and more secure than traditional banks. 

According to several sources, traditional financial services companies have lagged way behind in regard to security. Unfortunately but that’s true! Now since Fintech’s fundamentals include the effective use of tech, compliance and security won’t be such a problem. 

3.3 Upgraded Payment Systems

After security comes the upgraded payment systems.  We are living in a dog-eat-dog world, if you want to raise a cut above using fintech software turns out to be a must-do thing. As a result, nothing can stop your business from being effective. Which is possible only by using upgraded payment systems. Also, this leads to enhanced business-client relations, and increased ROI.

3.4 Speed and Convenience is Best for Companies as well as Customers

Since we mentioned this  earlier,  offering instant results and taking care of your customers has become a priority for every industry and fintech is no exception. Now it has become possible to offer payments or lend money right away digitally in no time. For example, let us assume that you want short-term loans or some money just for a day. We know you will come across a  wide range of potential businesses who would like to offer. These are the ones making the most of the tech and maintaining the economy. 

3.5 Transparency

With the rise of Fintech in the traditional banking and financial services sector, the term transparency is no longer just said. In fact, it is being meant and implemented by the vendors. Several new benchmarks have been set by vendors all across the globe.  Other than just sending or receiving money everyone is kept in a tight loop featuring full transparency. A win-win situation for the banking industry as well as their valued customers.  

Of course, you do get all the other perks such as 24/7 dedicated customer support,  real-time updates and tight security measures and whatnot!

4. How Fintech Is Beneficial For Economic Growth!  

Till now, you must have realized the fact that how fintech innovations can make everything around so easy and effective. On that note, a recent IMF report entitled The Promise of Fintech: Financial Inclusion in the postCovid era reveals that those countries often have high annual GDP growth and believes in investing in higher levels of digital financial inclusion 

4.1 How does Fintech Contribute to Ever-Changing Economic Growth? 

To begin with, it reduces overall transaction costs. Another benefit is increased GDP and job opportunities. Further, Let’s take a look at the Top three countries having a good number of fintech startups.

• The USA – A considerable rise has been observed among companies offering digital currencies services here.
• The UK – Many fintech investments have been made in the UK, especially after the COVID massive hit and it is showing no signs of slowing down.
• Singapore – The Singapore government has already invested a significant amount in the ongoing as well as upcoming fintech projects. 

Lastly, Innovations in digital banking, fintech lending, and equity or debt crowdfunding platforms have been a pure bliss for banking and established financial institutions as well as their customers. 

4.2 What Scope of Activities Does This Fintech Cover? 

• Loans – There is a massive difference between the operating methods of banks and financial institutions now and then. You will be able to spot several Lending clubs (loan) markets.
• Payments – With the rise of the internet and mobile technology, mobile payment now can be easily done. . In fact, online payments whether it’s to shop or buy food or book tickets cannot be underestimated. Transfer of money is now possible with fewer conversion fees and no fraud. 
• Managing the Funds – With the emerging  technology, it seems that we humans have changed to a great extent in regards to our habits especially how we save money, invest or manage them. 

5. Conclusion

Brace yourself up as the fintech companies are  going to get bigger and better. Let’s keep our fingers crossed and keep watching the space to know more about what exciting lies ahead in the Fintech space.