Fintech is changing the financial sector in a major way. The industry is evolving so quickly and dramatically transforming the way we conduct financial transactions. Gone are the days that you have to visit a bank branch for any type of transaction, notes Freedom Financial. Nearly every transaction we complete these days can be done online or via smartphone without any human interaction at all.
What is Fintech?
Simply put, fintech is financial technology. The phrase applies to any type of technology that’s used to support or enable banking and financial services. Not only are companies developing new and innovative ways for consumers to complete financial transactions, Freedom Financial finds that these startups are being funded by large investors. These two factors combined provide the fuel for fintech to change the entire financial landscape.
According to Pitchbook, $17.4 billion was invested in global fintech last year. The amount of investment is predicted to continually increase, which means fintech is not only here to stay, it’s hear to completely transform the financial industry.
There’s a good chance you already use fintech in your everyday life. Do you use an app to check your bank balance? That’s fintech. Do you send money to family, friends or businesses through an app? That’s fintech. Have you checked your credit score on your phone? That’s fintech, too. According to Freedom Finanical, fintech includes more than just mobile banking apps. The technology extends to peer-to-peer lending, robo-advisors, cryptocurrencies, and crowdfunding.
Why is Fintech Such a Big Deal Right Now?
Several years ago, the world experienced its worst financial crisis in decades. The financial crisis that occurred in 2007-2008 created a financial disaster for the traditional banking system as they were forced to deal with the aftermath. As part of the recovery, Freedom Financial suggests that traditional financial institutions had to focus on changing their practices to fit the new regulations, which were designed to protect the world from a similar disaster.
While focusing their efforts on their new post-crisis norm, traditional banks weren’t able to invest much time or resources into innovation and new developments. Enter new fintech firms. Dozens and dozens of startups were created to fulfill consumers’ expectations for an evolution in their banking experience.
As consumers are able to do more things with their smartphones – order a ridesharing car, have groceries delivered to their homes, book a hotel room – it’s only natural that they’d expect the same with their financial services. This is a society that demands instant access to almost everything. Fintech meets that demand.
Fintech also puts financial services in the hands of those who were previously unbanked. For example, millions of consumers do not have a traditional bank account which makes them unable to complete many financial transactions. With fintech, however, the need for traditional banking is eliminated and the unbanked have unprecedented access to financial services.
Business also benefit from fintech, notes Freedom Financial. Through the technology, they’re able to improve customer experience, meet regulatory requirements, cut costs and more. Even the traditional banking industry is now finding ways to capitalize on fintech. Whether they will catch up remains to be seen. What we do know is that businesses in the fintech will have to stay ahead of the curve if they want to experience long-term success in this ever-changing industry.