FinTech, a combination of two words – “finance” and “technology”, is a relatively new and frequently imprecise phrase that refers to any developing technology that allows consumers or financial institutions to deliver financial services in newer, faster ways than previously possible. Consider the difference between strolling into a bank and being able to check your amount in real-time on your phone, this is what FinTech does. FinTech refers to technical advancements in the design and delivery of financial services and products. The use of Big Data, artificial intelligence (AI), and machine learning to evaluate investment possibilities, optimize portfolios, and manage risks is one of the latest breakthroughs in finance technology.
FinTech is enabling customers to take control of their finances, resulting in far greater financial knowledge than ever before. By utilizing new technologies, it is tearing down outdated silos and assisting clients in improving their financial situations and outcomes.
How does FinTech work?
Fintech is not a so-to-say new concept; it has just evolved at a rapid pace. Whether it is the credit cards in the 1950s or ATMs, electronic trading floors, personal finance applications, and high-frequency trading in the decades after, technology has always been a part of the financial industry to some extent.
Financial technology’s innards differ from project to project and application to application. Machine learning algorithms, blockchain, and data science are being used to handle everything from process credit risks to running hedge funds in some of the most recent advancements. In fact, there’s now a whole category of regulatory technology called “regtech” that’s meant to help businesses like fintech manage the difficult world of compliance and regulatory challenges.
Concerns of FinTech
Concerns about cybersecurity in the fintech business have developed in tandem with the industry’s growth. The tremendous global expansion of fintech companies and marketplaces has increased the exposure of weaknesses in fintech infrastructure, making it a target for cybercriminals. Fortunately, technology continues to advance, reducing existing fraud risks and mitigating new ones.
Examples of FinTech
Pay Pal, Paytm, Phone Pe, Bharat Pe, inter alia, are examples of well-known FinTech companies that have developed in the last decade, offering fresh twists on financial principles and allowing individuals to have greater control over their financial results.
- Banking: The fintech industry includes a substantial portion of mobile banking. Consumers have increasingly requested simple digital access to their bank accounts, particularly on mobile devices, in the field of personal finance. With the rise of digital-first banks, or “Neobanks,” almost all major banks now provide some form of mobile banking. Neobanks are the type of banks that do not have physical branches and provide customers with checking, savings, payment services, and loans through a fully mobile and digital infrastructure.
- Cryptocurrency & Blockchain: The emergence of cryptocurrencies and blockchain is occurring in tandem with fintech. Blockchain is the technology that allows cryptocurrency mining and marketplaces to exist, and both blockchain and fintech are responsible for improvements in cryptocurrency technology. Though blockchain and cryptocurrency are distinct technologies that can be considered outside of the world of fintech, both are theoretically required to develop practical applications that advance fintech.
- Investment & Savings: In recent years, fintech has resulted in an increase in the number of investment and savings apps. Companies like Robinhood, Stash, and Acorns are removing more barriers to investing than ever before. While these applications take different approaches, they all use a combination of savings and automatic small-dollar investing ways to expose users to the markets, such as fast round-up contributions on purchases.
- Machine Learning & Trading: The Holy Grail of finance is being able to foresee where markets will go. With billions of dollars on the line, it’s no surprise that machine learning is becoming more prevalent in fintech. The strength of this AI subset rests in its capacity to process huge amounts of data using algorithms designed to detect trends and dangers, giving consumers, businesses, banks, and other organisations a better knowledge of investment and purchasing risks earlier in the process.
- Payments: Fintech is extremely adept at moving money around. “I’ll Gpay you” has taken over as a replacement for “I’ll pay you later”. Of course, GooglePay (Gpay) is a popular mobile payment platform. The way we do business has altered as a result of payment businesses. Sending money online anywhere in the world is now easier than ever. Popular payment fintech firms include Paytm, PhonePe, BharatPe, and many others, in addition to Gpay.
- Lending: Fintech is also revolutionising credit by automating risk assessment, accelerating approval processes, and making loans more accessible. Hundreds of millions of individuals around the world can now apply for a loan using their mobile devices, and new data points and risk modelling skills are allowing credit to be extended to previously underserved groups. Furthermore, individuals can request credit reports numerous times a year without affecting their credit score, making the entire lending world’s backend more transparent for all.
- Insurance: While insurtech is rapidly becoming into its own business, it still comes under the fintech umbrella. Because insurance is a late adopter of technology, several fintech businesses are teaming up with traditional insurers to help automate operations and increase coverage. The business is facing a lot of innovation, from mobile car insurance to wearables for health insurance.
India offers a great space for a FinTech revolution due to various factors such as an innovation-driven startup scene, a highly favorable market, increased smartphone and internet penetration levels, a young population with a median age in the 20s, and government-led efforts to promote the industry. Furthermore, rising financial technology awareness has given the Indian FinTech industry a much-needed boost.
FinTech’s expansion in India is aided by increased relationships with traditional banking, insurance, and retail sectors, where they are aggressively adapting to changing client needs. FinTech presents huge growth potential for the industry, with India gearing towards its massive adoption.
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