Financial technology or Fintech is the combination of finance and technology, used to enhance financial delivery and business operations. Fintech disrupts the traditional methods of financing and provides services, software, or a business that provides technologically advanced ways to make financial processes more efficient, according to Alessandro Bazzoni.
Fintech describes any company using the internet, cloud services, mobile devices, or software to perform or connect with financial services. This new way of managing finances has proved very easy and manageable for the business thus proposing a threat to traditional banking and financial systems.
Examples of Financial Technology
Financial technology is being used for a lot of things to help in better financing.
Cryptocurrency and Blockchain
Cryptocurrency and blockchain are very good examples of financial technology. Coinbase and Gemini are cryptocurrency exchanges that help in buying and selling cryptocurrencies like litecoin or bitcoin. While blockchain services help by keeping provenance data on the blockchain, services like BlockVerify and reduce fraud help achieve that. In recent years, blockchain and cryptocurrency have taken the investment world by storm.
Crowdfunding platforms allow the app or internet users to send or receive money and also receive money from others on the platform. Added to this, it allows individuals or even businesses to pool money from different sources in the same place. The traditional method of going to the bank and applying for a loan is no longer necessary, now it is possible to contact an investor directly to ask for money for your business or any other work. Numerous crowdfunding platforms have increased over the past few years, Patreon and GoFundMe are very widely used.
Stock Trading and Robo-Advising apps
Investors now do not have to go directly to the stock exchange and can buy or sell the stock with the help of their smartphone and at home with the help of stock trading apps. This has to be one of the most amazing developments of Fintech. Robo-advising has paved its way into the asset management sector and provides algorithm-based asset recommendations and portfolio management. As a result, this has increased a lot of efficiencies and has lowered costs.
Using brilliant technology users can buy, exchange or receive money with the help of their mobile phones are known as mobile payments. This can be achieved by mobile payments or online banking apps, such as Venmo.
Technology like insurtech has disrupted the insurance industry completely. It offers data protection, and also everything from car insurance to house insurance. These startups are gaining more and more funding with time and thus paving their way to be the new way of getting insurance.
The traditional way of creating a budget can be very time-consuming and hectic. Keeping track of checks, making spreadsheets has a room for mistake and also take away valuable time. Due to this budgeting apps have proved to be a consumer’s favorite. Through the development of financial budgeting apps, a consumer can keep track of their budget easily. They can track their income and buying speed thus teaching them new ways of handling money. It saves time, it is very easy, and has less room for mistakes.
Regulatory technology or Regtech is the automation of compliance processes for financial institutions. It manages large amounts of data at cost-effective prices. It also manages transaction records and compliance documents such as tax returns.
Users of Financial Technology
Financial technology is gradually taking over the financial world as more and more people are awestruck by its ease. Fintech is being used in different ways.
Firstly, it is being used from business to business. Traditionally if a business wanted to expand or for any other money-related issues they would go to the bank to obtain loans or other finances. However, financial technology helps to finance through mobile technology. Added to this, to interact with financial data and improve their services, cloud-based platforms, and customer relationship management are helping businesses.
Secondly, Fintech has a business-to-client application as well. Apps like Venmo or PayPal allow a customer to exchange money through mobile technology while budgeting apps help consumers or clients budget their finances better.
Technologies that contribute to Financial Technology
- Robotic Process Automation: – For an increase in efficiency and to avoid any mistake it is important to avoid human intervention in a task. Robotic Process Automation is the process of assigning manual, repetitive tasks to robotics instead of humans. RPA provides applications like statistics and data collection, regulatory compliance management, and transaction management.
- Artificial Intelligence and Machine Learning: – Artificial intelligence takes a huge part in shaping financial technology to what it is today. It is continuing to get better with the help of these. Some applications of AI and ML are wealth management, credit scoring, and fraud detection.
- Big Data and Data Analytics: – To Fintech companies data of customers and high-value markets are of great importance. With the help of these large data assets, they can determine a customer’s preferences their investment behaviors, and spending habits. This helps to create predictive analytics. Predictive analytics is when companies use past information and mathematical algorithms to determine how customers behave. This helps in planning marketing strategies and fraud detection algorithms.
- Blockchain Technology: – The financial industry makes use of blockchain technology t a large scale due to its capability to store sensitive data and securely store transaction records. When blockchain technology has applied the chances of cyber-attacks are very low as it encrypts each transaction. Blockchain technology also helps with cryptocurrency and is said to be its backbone to its safe and secure method.
Fintech has increased a lot over the past few years and it is continuing to take over the world rapidly. In notaoficial.com Alessandro Bazzoni discusses in detail the increase in the use of financial technology in 2021 and how it is contributing to the success of financial problems. As a result financial technology is showing the world the new and cost-effective way of financing.