• THE DEFINITION OF FINTECH
• Fintech is a combination of the words “financial” and “technology”.
• It refers to any app, software, or technology that allows people or businesses to
digitally access, manage, or gain insights into their finances or make financial
transactions.
• Over the last decade, as consumers increasingly adopted digital tools, fintech
arose as a means to help consumers address financial challenges and make
progress toward financial goals. In turn, consumers have come to rely on fintech
for a range of uses—from banking and budgeting to investments and lending—as
well as for its tangible everyday benefits.
The objectives of fintech
• The primary objectives of fintech (financial technology) revolve around
enhancing financial services through technology, innovation, and efficiency.
Some of the key goals are:
• 1. FINANCIAL INCLUSION
• Provide banking and financial services to the unbanked and underbanked
populations.
• Expand access to digital wallets, mobile banking, and microfinance solutions.
• 2. COST REDUCTION & EFFICIENCY
• Minimize transaction and operational costs through automation and digitization.
• Reduce the need for physical banking infrastructure.
• 3. FASTER & SEAMLESS TRANSACTIONS
• Enable instant money transfers, online payments, and digital banking.
• Improve the speed of cross-border remittances and e-commerce transactions.
• 4. SECURITY & FRAUD PREVENTION
• Use AI, blockchain, and biometric authentication to enhance cybersecurity.
• Implement fraud detection mechanisms to protect users and businesses.
• 5. INNOVATION IN FINANCIAL SERVICES
• Develop new digital banking models, AI-driven investments, and blockchain-
based solutions.
• Introduce robo-advisors, smart contracts, and peer-to-peer lending platforms.
• 6. IMPROVED CUSTOMER EXPERIENCE
• Offer user-friendly apps and digital platforms for better financial management.
• Provide personalized Financial recommendations using ai and big data
analytics.
• 7. COMPLIANCE & TRANSPARENCY
• Ensure adherence to regulatory frameworks to build trust in digital financial
services.
• Promote transparent lending, fair interest rates, and responsible credit
assessment.
• 7. COMPLIANCE & TRANSPARENCY
• Ensure adherence to regulatory frameworks to build trust in digital financial
services.
• Promote transparent lending, fair interest rates, and responsible credit
assessment.
• 8. EMPOWERING BUSINESSES & SMEs
• Enable small and medium-sized enterprises (SMEs) to access credit, payment
solutions, and digital banking services.
• Support e-commerce and gig economy workers with fintech-based financial
tools.
The benefits of Fintech for consumers
• It saves me time…58%
• It Helps me feel in control of my finances…48%
• Saved me money…46%
• Reduced fear & stress of managing money…34%
• helped me recover from financial mistakes…27%
• Source: 2022 fintech effect survey.
• In addition to time and money savings, respondents also cited softer answers
including easier financial tracking, greater control, more choice, and improved
financial habits.
• This speaks to the many ways—both quantifiable and not—that fintech has
become an integral part of people’s daily lives.
What is a fintech company?
• A fintech company refers to any company that offers financial services or
applications that rely heavily on technology. Fintech companies are often
industry disruptors—they use technology to change how consumers interact
with the financial industry. This includes expanding access to financial
products, lowering fees, and providing faster, more personalized service.
What does fintech do and how does
it work?
• Several types of fintech apps work in different ways. Some fintech apps safely
unlock financial account data (e.g., Transactions and account balances) with
another app or they may allow users to track their investments across multiple
platforms.
• For example, wealth and financial management apps will aggregate financial
account data from different accounts into one easy-to-read snapshot, showing
users all of their financial information in one convenient place. Those same
apps might also make suggestions to help users improve their financial position
based on the available data.
• Another fintech category is apps that allow users to do things like trade stocks
or cryptocurrencies. Robinhood and Coinbase are classic fintech examples
that allow users to quickly and easily make a wide variety of investments.
• Some tweaking is necessary to make fintech apps work:
• APIs: Financial APIs (application program interfaces) safely and securely
connect consumers’ bank accounts to fintech apps and services so they can
share financial data, transfer funds, and verify their identities.
• Mobile applications: Most fintech companies offer a mobile app so that users
can access their funds and insights at any time. Whether it be a digital banking
app, a financial management tool, or an investment platform, mobile apps are
nearly synonymous with fintech.
• Web-based solutions: Besides offering a mobile app, some (but not all) fintechs
also offer a web-based solution where users can log in via a web browser and
perform the same functionality they can perform on the mobile app.
• With the power of APIs to safely unlock financial data and convenient mobile
apps, fintech has changed daily life for most.
• It’s now common that friends and family who want to send money to each other
would use Cash App or PayPal, rather than exchange cash or checks in person
or via the mail.
Types of fintech and fintech products
• Fintech covers a wide range of use cases across business-to-business (B2B),
business-to-consumer (B2C), and peer-to-peer (P2P) markets. The following are
some examples of the types of fintech companies and products that are
changing the financial services industry.
• Fintech Banks
• One of the most central components of the financial system, banking services
have been disrupted by the fintech industry. Things like account opening and
funding are now quick and easy thanks to technology. Some fintechs offer
flexible personal checking accounts, high-yield saving accounts, and even
secured credit cards—all without the traditional fees that can hinder people
from achieving their financial goals.
• Digital Payments
• Cashless payments are on the rise. Since the onset of the pandemic, cashless
payments have made strides, with around 45% of the total volume.
• Payment apps and services have become more and more common. That’s
because receiving payments via direct bank transfer is significantly less
expensive than using credit cards, and getting users signed up and
authenticated has become faster and easier.
• Personal Financial Management (PFM)
• PFM apps help users consolidate financial information from various accounts
into a single dashboard, making it easier to stay up-to-date with their finances.
These services help people to manage, budget, and make sense of their money.
• Wealth Management
• Fintech solutions help financial advisors and wealth management platforms
aggregate held-away account information to better grow assets under
management (AUM) while delivering more holistic financial advice.
• Fintechs offers a suite of products and features to help users research and
track all of their investments in one place. A subscription platform gives
customers easy and affordable access to investment, education, and financial
advice products.
• Fintech Lenders
• Lenders often struggle to gain a full and accurate picture of their applicants due
to the amount of work and time it takes to collect income information, account
balances, and asset history. It can be a cumbersome process to get borrowers
to connect their bank accounts to receive and repay loans.
• Top fintech lenders like SoFi, Prosper, and SoLo are using technology to
overcome these pain points in the lending process while also providing more
consumer-friendly loan choices. They are helping consumers avoid predatory
loans and giving them access to new loan types such as peer-to-peer loans.
• Embedded Finance
• Embedded finance refers to financial services offered seamlessly in
consumers’ everyday experiences through non-financial products and services.
• For example, Shopify Balance provides business checking accounts for Shopify
users that help them get paid faster and manage their business. Shopify isn’t a
financial institution, making Shopify Balance a financial product ‘embedded’ in
a non-financial product. Some companies are helping make this predominant,
through API integrations that embed financial services directly into the product
or user experience of non-financial companies.
The impact of fintech companies
• Consumers say they manage more than 60% of their finances digitally.
• More than just providing convenience and lowering consumer fees, fintech is
also helping foster financial freedom by offering millions of underbanked
people around the world access to financial products.
• Fintech is making finance more inclusive and social as well.
• Fintech is helping consumers change habits and obtain a fuller understanding
of their financial circumstances and available options, giving them more
confidence to take action and achieve better financial outcomes. It gives
people the ability to take actions that were previously more difficult to take
(such as investing via phone).
