Financial technology (fintech) is the services sector that emerged in the 21st, and that describes the use of technology to provide services and financial products to consumers. This could be in the banking, insurance, investment sectors – everything related to finance. Although it is a relatively new word, fintech is not really new. Technology has always changed the financial sector. However, the Internet, combined with the widespread use of devices such as smartphones and tablets, means that the speed of this change has greatly increased in recent years.
Examples of Fintech
• You can now open a bank account on the Internet without physically visiting a bank, also you can link the account to the smartphone and use it to monitor transactions. You can even turn your smartphone into a “digital wallet” and use it to pay for things using money in your account.
• Fintech is also rapidly changing the insurance and investment industries. Car insurance providers sell “telematics” insurance in which the guide is monitored using data collected via the smartphone or a “black box” mounted in your car. This data can then be used to determine how much you pay for the insurance policy. In the future, it may be possible to purchase short-term or “pay as you go” insurance.
Categories of Fintech
• Lending Financial technology companies are changing the loan process. People no longer need to turn to banks or credit unions to borrow money. Many FinTech companies are now lending directly to consumers.
Consumers can apply for loans online and get approval quickly.
• International money transfers Traditionally, internal money transfers have been very expensive. Banks and traditional money transfer companies charge up to 8 % of taxes. For money transfers, these commissions add up quickly. Worse, traditional transfers are slow.
Financial technology companies in this category offer faster and cheaper.
• Personal finance is another important category in the financial technology market. In the past, people needed to talk to financial advisors at banks to get advice on personal finances. For the budget, they needed to use spreadsheets or an envelope system. FinTech companies now provide pension or investment advice.
• Payments are another category of the financial technology market. Companies in this category allow people to send money to each other without having to go to banks. Banks tend to charge exorbitant fees for simple payments such as peer-to-peer transfers.
FinTech companies allow users to send money quickly and conveniently.
• Equity Financing even financial technology companies are transforming equity financing. Companies in this category of the FinTech market are making it easier for companies to raise funds. Some companies work to connect accredited investors with controlled startups.
• Consumer banking is another category of the financial technology market. Traditional banks charge high fees, so companies in this category present an alternative for consumers, that uses digital bank accounts instead of using a traditional bank.
• Insurance Financial technology companies have recently branched out into the insurance market. Many companies in this category are focusing on distribution. They are using new technologies such as apps to reach customers who are under-insured by insurance. They are also more flexible than traditional insurers.
• Speed and convenience, Fintech products tend to be delivered online and therefore are easier and faster for consumers.
• A major choice, consumers benefit from a wider choice of products and services because they can be purchased remotely, regardless of their location.
• Cheaper offers, Fintech companies may not need to invest money in physical infrastructure such as a branch network, so they may be able to offer cheaper offers to consumers.
• More personalized products, technology allows fin-tech companies to collect and store more information about customers so that they can offer consumers more personalized products or services.
• Unclear rights, Fintech companies could be new to the financial sector and use different business models for traditional suppliers. This can make it more difficult to ascertain which are regulated and what your rights are if something goes wrong.
• By making a rash decision, financial products purchased online without ever meeting anyone faces to face could make it easier for consumers to make quick and misinformed decisions
.• Technology-based risks, financial products purchased online may leave you more exposed to technology-based risks. For example, your personal data could be used improperly or you could be a victim of cybercrime.
• Financial exclusion, While technology increases choice and access for the majority of consumers, it can exclude those who do not know how to use the Internet or devices such as computers, smartphones, and tablets.