Financial technology is now more often known as FinTech, and essentially it describes a business that will make use of software and modern technology to provide financial services.
Banks are currently struggling to keep up with the vast expansion on fintech start-ups in terms of the speed of innovation. As technology evolves, fintech companies can evolve with them, leaving the banks far behind. Business and private life have become increasingly digitalised over the years, and the same principle also applies to financial services, such as money transfer, lending, investment and payment.
This is especially applying to the younger generation, also known as millennials, those that were born in late 80’s onwards. This generation has been brought up with technology, and it is deeply woven into most aspects of their lives. This generation much prefer the quick and seamless process of mobile banking than going all the way to a branch to transfer money or check a balance. Meeting with a banking consultant is a lengthy process when compared to logging on to an account online, therefore it is not surprising that many people will reply on this fintech service rather than the growingly old fashioned method.
Because of this, the world is investing heavily in fintech companies, some countries more than others. The United States has invested the most, and the amount of money increases rapidly every year. Europe follows this, followed by Asia and the rest of the world, yet currently the USA is well ahead in terms of investment. Some of the tech hubs of the world include San Francisco, London, New York, Tel Aviv, Singapore and Berlin, among various others.
Although banks are major users of technology, a fintech company will put technology into the heart of everything that they do. Changing the way that the company interacts with their customers. The fintech boom has had a number of positive impacts to society, for example due to the increased competition, prices for services, such as transferring money overseas, has been reduced significantly. This evolution is really only its early stages, so there may be even more of a drop in prices in years to come.
Surprisingly, the workforces behind these companies are not usually financial. Although of course it helps if they know a little about the services that they are offering, the team usually comprises of experts in computer science, engineering or IT.
How a fintech company should be regulated is currently the subject of much debate. Traditional companies in the financial sector are governed by certain regulations, but as fintechs do not operate like a bank or insurer, they are not generally subject to these regulations. The existing supervisory framework has had to be looked at carefully, and policy makers are struggling to find the right balance to allow for innovation yet still strive for financial stability.
Several recommendations include clarifying the boundaries of personal data use in these businesses, proactively setting industry standards, monitor and understand fintech innovation and setting up a forum for public or private dialogue.
There is hope that these recommendations will gain broad support so that they can be put into action soon to create concrete industry and policy methods, but currently the future is still unclear.
Some things are certain however, with more and more companies rising, it is going to impossible for companies to stay at the top for very long, therefore fintech company’s growth period will be very short. As soon as they have made a name for themselves, it will not be very long before a new and more innovative and easy to use company comes along and knocks the previous off of the top spot. In short, a company will have to be extremely dynamic and responsive to keep up with the every changing and developing technology.
The next few years will see an interesting development in the industry, as no one really knows what the future will hold. It is not believed that traditional banking methods will cease to exist, as there are still plenty of people in the world who still prefer the trust and familiarity of walking into a bank branch, but it is pretty certain that the landscape will look very different to what it does today in years to come.
The infographic below was created by our friend at DinarDirham. They deal in digital & physical gold, with an emphasis on fitech and blockchain technology. The company has created a range of gold-backed crypto assets, including: Gold Smart Contracts (GSC), DinarCoins, The Universal Bitcoin Wallet (UBW for short, aka the DinarDirham Wallet), DinarDirham Debit Card, and DinarDirham Physical Gold (not a crypto asset, but is the physical backing that’s represented by them).