The term FinTech is derived by joining two words which are financial services and digital technology. In a nutshell, FinTech simply prompts the use of digital technology by startups to come up with innovative products and services such as mobile payments, alternative finance, online banking, big data, and overall financial management.
FinTech was introduced as a technology that was used at the back-end systems of financial institutions and banks. However, since then its definition has changed significantly. Now it encompasses several applications that are consumer based. By 2019, you can trade stocks, manage funds, and pay for your insurance and food via this technology.
FinTech for banking has impacted numerous applications and revolutionized the way consumers access their finances. Its impact ranges from mobile payment apps like Square to investment and insurance companies. This profound impact of FinTech can also be seen as a potential threat to the brick-and-mortar or traditional banks.
In today’s digital era, customers are not keen to go for services provided by the traditional financial services industry. Instead, they prefer services that are quick and safe. This is the reason why FinTech and FinTech is gaining popularity and causing disruption in the banking and other financial services.
Now, let’s see FinTech’s impact through some stats. According to a study that took place in 2016, a vast majority of Americans (84 percent) use FinTech for managing their finances. Moreover, the majority of them use between one to three apps in order to manage their finances. In addition, around 69 percent use these apps at least a few times a week and around one-third use it on a daily basis.
Currently there are approx. 1.7 billion people worldwide without any bank accounts. FinTech comes as a savior for all those people by providing an easy option to participate and access the financial services without any need of a bank account. FinTech is the best option to carry out financial inclusion since it’s developed to provide consumers a direct access to their finances through simple yet cutting-edge technology.
The Fintech Revolution is not a fairy tale or science fiction; it’s reality changing the shape of the global financial system.
P2P loans at a fingertip, conscious crowd investing, cryptocurrency payments, automated financial advisors — these things have appeared thanks to the close collaboration of FinTech startups and traditional institutions.
While the former get funding for their out-of-the-box projects, the latter take advantage of digitisation. Undoubtedly, the results of this alliance are beneficial for both parties.
Let’s start with a few facts about the state of the market before we dug deep into how FinTech drives financial services innovation.
1. Traditional financial institutions are believed to be one of the most likely entities to undergo disruptive changes in the next few years.
2. The largest investors supporting FinTech startups are financial institutions: Citigroup, Banco Santander, and Goldman Sachs, which proves their interest in the evolving field.
In the US, for instance, FinTech firms gained 63% of total investments poured into the financial industry.
4. The most used features in financial application development all over the globe are:
- money transfers and payments;
- savings and investments;
- financial planning;