What are Fintech Companies?
Fintech is actually a compound word, an abbreviation of financial technology, literally translated fintech in Chinese means “financial technology”. The four words “financial technology” are still relatively abstract, and there is no complete and unified definition of the concept of financial technology on a global scale. The definition of Wikipedia is “a group of companies that use technology to make financial services more efficient. In the economic industry, fintech companies are usually start-ups that try to bypass the existing financial system and reach users directly. They challenge traditional institutions that rely less on software
5 Problems Fintech Can Solve:
- Access to Payment Options
Today’s consumers have more payment options than ever before, from using a credit card to writing a check, and from using the currency of their home country to paying in a foreign currency. In the past, companies that wanted to accept multiple forms of payment had to assume some level of risk, rely on a variety of payment processors, and pay high fees.
Fintech is helping to broaden the payment options available to individuals and expand the payment methods businesses can accept. Some fintech payment processing apps charge a flat rate for all credit card transactions, for example. Others will let people pay in a foreign currency and charge an exchange rate that is better than the rate offered by traditional banks.
- Security Concerns
Now more than ever, people are concerned about the security of their financial information. The security measures often used to protect people’s data, such as PINs, might not be as secure as you would expect. It is relatively easy to guess a four or six-digit number. Fintech is helping to solve security concerns by integrating biometric security measurements into certain programs. ATMs can scan a person’s fingerprint rather than asking them for a PIN. Other forms of biometric authentication include voice recognition and iris scanning.
- Limited Access to Financing
One of the great catch-22s of obtaining financing is that, to get a loan, most people need to have a loan or credit history already. Businesses that are just starting can find it particularly challenging to get the loan financing they need. Fintech programs that remove many of the traditional barriers to obtaining funding can help smaller companies or specific individuals get the money they need to get started, expand or achieve personal goals. In the U.S., 3.2 million borrowers took out peer-to-peer loans totaling more than $48 billion between 2006 and 2018.
- Reaching the Unbanked
As of 2017, around 1.7 billion people around the world did not have a bank account. Although the number of “unbanked” people has fallen in recent years — in 2014, around 2 billion people did not have a bank account — more than one-quarter of the global population still falls into the “unbanked” category. There are many reasons why people do not open a bank account, but the primary one is that they do not have enough money to do so.
Fintech can help to make the financial industry more inclusive by expanding the range of financial services available and by broadening access to financial services. For example, instead of requiring a minimum account balance that might be out of reach for someone on a low income, a fintech app can help a person establish a savings account and save whatever they can afford, such as $5 per month. Since the app is mobile-based, a person will not need to travel a long distance to open an account in person, removing another common barrier to opening a bank account.
- Limited Access to Investing
Fintech has helped to expand access to investing to people who traditionally were reluctant to invest or communities that traditionally focused on using and saving cash. Historically, investment firms targeted male customers, ignoring women who might have been interested in investing. Certain apps have focused on opening investment accounts and developing portfolios for customers who might previously be ignored by brokerages or who might not have felt welcome as a brokerage’s customer.