What is FinTech? Why is it evolving?

Advancement in technology has left no field untouched. Technology has made a mark even in the field of finance. Fintech stands to Financial Technologies. FinTech refers to the use of technologies for the services related to finance. The use of fintech ranges from the backend software used by banks to the digital wallets used by customers. Fintech is basically a revolution in the financial industry that aims to disrupt the conventional ways of working in finance by automating and improving the delivery of financial services.

Initially, fintech was perceived as a back end service used by banks and financial institutes. However, the growth in fintech has become so dramatic that the investment in the field grew from $930 million in 2008 to $12 billion in 2015. Different types of fintech have been integrated in the core functions of banks and financial institutions.

One of the major products of banks is loans. Fintech has been continuously evolving with the lending function of banks. Digitalization of loan processes with the help of technology will prevent borrowers from getting into complex and delayed process of attaining loans. A systematic analysis of credit score along with the reduced cost and accelerated decision making from banks with the help of fintech is likely to make it easier for borrowers to attain loans.

Besides, digital banks have evolved with time. These banks allow customers to experience online banking with the use of artificial intelligence, including tools such as face recognition and voice biometrics. Such banks allow customers to make real time payment, transfer money, check balances and several other banking functions through any kind of electronic devices.

Even insurance companies use fintech to reach a newer segment of clients through data science. These companies use targeted advertisement and provide dynamic pricing to customers online with the use of fintech.

Dynamics of investing have also changed due to the use of fintech. A lot of investors can now buy and sell different financial instruments using their smartphones and laptops. A number of trade executions can be done digitally.

Besides, fintech has also gained its importance in balancing personal finances. Previously, people needed financial advisor who could take care of their budgets, savings and fundings. However, through fintech mobile apps have been able to provide similar services.

It is important that the development in fintech keeps taking place. Over the past years, fintech has converted things that were once thought impossible into possible. The real time online payment system that banks believed wouldn’t work was accomplished by digital wallets and mobile payment system in a reduced cost and less effort. Moreover, the bulk of financial data that took more time and more effort to be analyzed can now be analyzed with algorithm in a short span of time, making interpretation simpler and objective. Fintech has now changed the banking experience to both millennial and generation z. The power of fintech has not only touched banking arena but also startups. The evolution of idea of crowd funding became possible through fintech.  Several ideas have been brought to life through funds collected via crowdfunding. A lot of startups might enjoy better future considering that fintech still has a lot to bring in terms of data related to potential customers, advertising impact and customer expectation.

The growth of fintech now poses strategic threat. There are a lot of challenges that fintech industry has been facing worldwide. First and foremost, fintech companies are facing problems with regulations. A lot of fintech companies cannot still decide which rules and regulations they adhere to. This has further brought complexities in their business. Furthermore, a lot of banks and financial institutes have come up with their own fintech products such as mobile payment system. Therefore, for any new comer (fintech company), the threat is that a bigger bank or financial institute may replicate their products and futures and eventually hamper their profit. Finally, a lot of problems related to cybercrime have also threatened functioning of fintech. Hackers can manipulate information in several ways and further risk the money of customers. Therefore, fintech industry is not far from challenges. However, this does not mean that the evolution of fintech should be stopped. From digital wallets to crypto currencies, fintech industry yet has a lot of new ideas to bring.