“The point of Fintech” that’s unarguably the most difficult to understand

Money is a virtual concept used as a common denotement and measure of value. Currency notes are the physical manifestation of money and Finance is the process of dealing with money or making deals that involve money. For example

• A purchase transaction exchanges goods or services for money
• In an investment or loan, X money is given in return for Y money paid periodically
• In an insurance policy, a value X is assigned to the insured thing, which should be reimbursed in case of loss or damage if Y money is paid every year to the insurer

Finance creates systems and instruments to deal with money in new ways and open doors that didn’t exist before. These range from cheques and demand drafts to SIPs and microfinance.

The point of any technology is to increase efficiencies and / or decrease costs through increasing accessibility, making work easier and faster, eventually simplifying life.

What is fintech?

Any innovation in the ways people or businesses deal with money can be called “Fintech”. This can be traced from paper, plastic and digital money to ATMs, internet banking and online stock trading.

What is the point of fintech?

It is to increase efficiencies and reduce costs in dealing with money.

How fintech does this

• Reduce manpower and operational costs: ATMs and digital banking have enabled banks to reach wider without investing astronomically in physical branches.
• User Experience: Financial services and products can reach a greater audience through simplification, ease of use, faster workflows and localizations.
• Digitization: Technology is still reaching some untouched aspects for finance. E.g. Artoo drastically decreases the TAT for loans by enabling data entry and credit analysis on a mobile device. Similarly ICICI bank reduced the paperwork to open a bank account by introducing a tab for data entry.
• Virtualization of money: Cheques made transactions of huge values easier and safer, eliminating huge sums of currency.
• Game-changing innovations: Paypal made international money transfers faster while charging lesser than banks. UPI has simplified money transfers and is poised to become the de facto payments standard.
• Information and Financial Assistance: Many apps and websites give comparisons for loans, insurances, investment instruments, taxation, etc. Apps like Walnut do automatic expense tracking and budgeting to help the user make better decisions.

Implications

• Increased financial literacy — better informed, more aware users who feel confident to take their own financial decisions
• Better opportunities with more informed financial planning and easier credit. Example, easier credit to a small shop owner can help him expand his business or easier investment options can help him save regularly.
• Digitised economy — reduced tax leakages
• Secure transactions with biometric verification, example Aadhar based payments.
• New types of loans and savings and other financial products that weren’t possible before fintech interventions

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