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There are many diverse ways of how FinTech is transforming financial services and changes the way consumers interact with existing business models. Here’re the major categories of FinTech application.
In this new age of digital transformation where technology is being applied to almost every area of every known industry in the world, it’s of no surprise that the financial sector is one of these areas that is employing the latest technological developments. FinTech, an abbreviation for Financial Technology, has helped streamline a lot of financial services for businesses and individuals alike.
FinTech encompasses any emerging technology that offers faster and more efficient means of delivering financial services than the traditional methods available. More startups and financial business models are making use of these new methods of enabling and enhancing financial services.
FinTech adds more to the competitive advantage traditional business models have in the markets by influencing the financial functions and behaviors consumers already have access to. Generally, FinTech encompasses all companies that make use of the Internet, cloud services, and software technology to convey financial services to consumers on mobile devices.
Connecting the consumers’ finances with technology is what many FinTech products are designed to do in an effort to facilitate ease of use in whatever financial operations the consumers might be interested in.
There are many diverse applications where FinTech is transforming financial services and changing the way consumers interact with the products business models are offering. Here are some of the categories where FinTech is being applied:
Blockchain and Cryptocurrency. FinTech and Blockchain is a prime example of how FinTech is influencing the evolution of financial services with the availability of smart contracts, Proof-of-Work, Peer-to-Peer transactions, blockchain-powered trading platforms, decentralized ledgers, and immutable records.
Blockchain provides more private, secure, and transparent means of tracking the complete lifecycle of financial transactions. The decentralized and distributed nature of cryptocurrencies, which are powered by the Blockchain technology, helps it garner trust and approval from business models and consumers alike.
The blockchain technology is still in a growing phase with more developments and advancements being explored with further research. There are numerous platforms available that make use of Blockchain technology; some of them include Ethereum, Bitcoin, Chain, Bloq, Wirex, and much more.
Insurance (InsurTech). Insurance solutions of great value are introduced in the insurance industry with the adoption of digitized financial ecosystems to improve the customer experience. Smartphone apps, drones, Internet of Things (IoT), Artificial Intelligence (AI), Machine Learning, and other tools are being integrated by insurers to provide more impact through their services to consumers and other bodies that need them.
InsurTech is steadily changing the way insurance products are being perceived by customers, with many benefits being offered like online marketplaces, more convenient and personalized approaches, customized profiting, and many more.
Rapid growth and development in the insurance industry have been made possible by the application of technology in areas whose operations might seem arduous using traditional means.
Regulatory (RegTech). RegTech was introduced in 2015 by the Financial Conduct Authority, who described it as ‘a subset of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.’ RegTech encompasses the use of innovative technology to aid better compliance and delivery of easy-to-integrate, secure, and cost-effective regulations.
In a world where finances are being taken over with the numerous application of technology, new regulatory models are needed to catch up with the advancements being made. Basically, RegTech is used to standardize and facilitate transparent regulatory processes that automate the whole compliance system.
Regulatory reporting, risk management, transaction monitoring, and compliance are a few of the ways RegTech is being used to provide regulatory solutions. Some RegTech platforms which offer such solutions are Regis-TR, Provenir, Continuity, and IdentityMind.
Lending (LendTech). This sector uses technology to offer lending solutions to consumers through more accurate and streamlined processes. Smart systems, using Artificial Intelligence and Machine Learning algorithms, are used to process and verify identity credentials to ensure error-free results.
Forecasting income prospects, assessment of the borrower’s track record, appraisal of collateral value, and predictions of changes are facilitated by the inclusion of technology in lending processes.
Payments (PayTech). FinTech is changing the payments industry with the development and integration of digitized processing applications and diverse processing networks. Wearable technology and smart devices are being developed for consumers to facilitate better digital connectivity and consumer identity protection.
The management of assets and processing of various payment transactions is made secure and easy through the use of Payment Technology (PayTech). Payment platforms that make use of PayTech include PayPal, WePay, Square, and MobiKwik.
Mobile Payments. Mobile wallets and other integrated payment solutions are being used widely by business models and individuals to facilitate and conduct payment operations through the use of technology. This is a major area of FinTech, seeing as every transaction being made by any consumer involves the payment process.
Without the availability of mobile payment platforms to transcend barriers posed by traditional methods, most transactions would seem arduous to make and complete. Consumers worldwide are making use of digitized wallets like Apple Pay, Google Wallet, Square Cash, and Zelle. These platforms are easy-to-use, secure, and improve the overall consumer experience.
Trading (TradeTech). TradeTech simply encompasses the application of information technology in an effort to reduce the information costs of international trade, facilitate trade finance, and increase transparency in trading operations for business models and consumers alike. International coordination is highly needed for the full potential and benefits to be realized.
TradeTech is used to facilitate and support cross-border trading through the use of IT systems in supply chain finance and asset distribution platforms.
Robo-Advising and Stock-Trading Apps. Through the use of technology, diversified investment portfolios can be built and made accessible for consumers without the need for an investment professional or advisor. This technology, Robo Advisors, is built for beginner investors to help with risk management as well as professional investment management. Examples of Robo-Advisors include Wealthfront, Acorns, Betterment, Personal Capital, and several others.
Buying and selling stock investments are made easier and better through the use of stock-trading apps rather than traditional means. Every online broker with resources makes use of these stock-trading apps to trade assets and investments. Some stock-trading apps include E*TRADE Mobile, TradeStation, TD Ameritrade, Stash, Charles Schwab, and many more.
Personal Finance (WealthTech). This part of FinTech focuses on the improvement of wealth management and retail investment services through the use of technology to augment and deliver the operations in a more efficient and automated manner. These digital solutions are used to enhance existing solutions and create new ones as well to be made accessible to new groups of investors.
WealthTech aids the simplification of the investment process, whereby investors can manage their investment portfolios. WealthTech is integrated into the finance sector by use of Micro-Investment, Robo-retirement, Portfolio management platforms, and others.
International Money Transfers. Barriers have been lifted through the integration of technology into payment platforms that can be used to facilitate international money transfers. Traditional means are less efficient and effective when it comes to this area of FinTech, seeing as better and more effective methods of payments exist now, which makes the whole process more streamlined, secure, faster, and easier for the consumers and business models.
Sending money overseas through the use of SWIFT or Peer-to-Peer networks helps in reducing fees incurred normally by traditional means.
Equity Financing. This is a method of raising funds or capital through the sale of shares of a company to the public, financial bodies, or investors. The capital garnered is then used to finance business startups or further expand already-established businesses.
Through the use of technology, a wider audience of investors can be tapped into by crowdfunding. Crowdfunding platforms that offer rewards to its participants include Kickstarter, Pebble, and several others.
Accounting. Machine Learning, Artificial Intelligence, Cloud Computing, Digitalized Tax platforms, and other technological advancements are being used to facilitate the automation and transparency of accounting operations. The use of technology in this area of finances has helped improve the access and analysis of data through the use of software and tools.
The time accountants’ need to process operations like invoice management, cash flow forecasting, and other accounting services has been reduced through the use of financial technology and software.
Consumer Banking (BankTech). Many banking institutions are embracing the use of digital technology to provide their services in a more streamlined and effective manner. BankTech involves the use of digitized platforms to offer banking solutions and products for consumers to take advantage of.
Better user experience, reduced costs, and friction in operations are a few of the benefits BankTech offers over traditional means of banking.
Internet of Things, Artificial Intelligence, Robotics, Machine Learning, Cloud Computing, and Automated Assistants are a few of the emerging technologies being used to improve the solutions and products available in financial sectors. FinTech has revolutionalized and is expected to shape the business models available for consumers to take advantage of.
Every part of the economy is gradually integrating and embedding FinTech as a part of its infrastructure.
The range of applications of FinTech is diverse and still growing with advancements in areas such as Blockchain, Lending platforms, Insurance Technology, Digital Banks, and several others. The FinTech industry is fast-growing, with many business models and consumers creating more demand for financial, technological solutions.
By using advanced technology, financial products have been made available to consumers through faster and more beneficial methods.
FinTech is still growing with more efficient and effective means of financial products being made possible for integration in many sectors of finance. More startups and companies are embracing FinTech as a key component in reaching out to more consumers and satisfying their needs.