FinTech: A Game Changer in Finance and Technology
The word Fintech is a compound term that comes from joining the first syllable of the words Finance and Technology it is a word that arises from the union of two and that brings together all those financial services companies that use the latest existing technology to be able to offer innovative financial products and services.
Fintechs are going to change the traditional financial sector from top to bottom, both at the level of individuals and companies, because although its size is currently very small and does not concern the banking sector now, it is expected that this sector will grow exponentially and that for the next 3 years the figures of millions that Fintech companies move in Europe will be billions, especially in the UK and the US.
Fintech’s Digital Transformation
What do Fintech companies do and what is the secret of their current development?
Fintech companies are involved in intermediating in the world of finance in multiple aspects, in money transfers, in lending, in purchases and sales of securities or in financial and investment advice, to name a few areas in which multiple Fintech companies are appearing.
Fintech companies are growing so fast because after the great crisis caused by the fall of the great investment bank Lehman Brothers, there was a huge dissatisfaction with the functioning of traditional banking and companies appeared like mushrooms with new investment and financing alternatives that filled part of the gap left by the discredit of traditional banking, which stopped financing individuals and companies to lick and heal their wounds.
As investors were very scalded by all that, they became somewhat distrustful and that has made Fintech companies grow slowly at first, but as new legal regulations are approved and the investor sees that they are trustworthy companies, little by little they have been losing that fear and now intermediation in finance through Fintech companies is multiplying, year after year.
Thanks to ICT (Information and Communication Technologies) the financial world is being transformed, just as one day they transformed the world of music or written journalism, now they will transform our finances since from a simple Smartphone we will be able to control all our finances in a faster, more agile, safer, simpler and, above all, much cheaper way.
The challenge of digitizing the financial sector
Fintech companies have realized the huge cake that a few banks were sharing among themselves and have decided to put the spoon, banks in their immobility and their desire to fatten their bottom line, with its monopoly of finance, have rested on their laurels and now Fintech companies are eating the toast offering the user a much better, beautiful and cheap alternative for their finances.
We are sure that in the future there will be fewer and fewer commercial banking offices on the street and that will be due to the development of Fintech companies, which will offer the same services but online. The new generations are already getting used to and adapting to working in this way and it is only a matter of time before this new way of doing and acting is transferred to the world of traditional finance.
Types of Fintech companies?
Fintech companies are companies that intermediate in all areas of the world of finance, acting as brokers, as payment mediators, as issuers and receivers of transfers or as financial advisors. Let’s see what types of Fintech companies exist and in what areas they operate.
- Financing of individuals and companies: Here we have, for example, Crowdlending companies, which are companies that put small investors in contact with applicants for funding through their website and that accompany, analyze, advise, help them make their investment decisions and is responsible for collecting fees from the lender and for paying the investor the interest and principal of the loans in which he invests.
- Transfer of funds: In the past, banks had a monopoly and therefore charged large commissions for transferring money, but now a multitude of companies have emerged that make transfers at very low prices.
- Financial and investment advice: Formerly the banks also controlled this sector of advice but following the emergence of the Internet and the development of new communication technologies, Fintech companies have been appearing that have been occupying this sector of advice and now there are many investors who go to them before making their investments to be well advised and that does not cost them a kidney such advice.
Payments and collections through Smartphone and mobile devices: There are already a lot of Fintech companies that allow you to use your mobile or tablet to pay for your purchases, they are even ahead of traditional banking, they are leaders in this sector and the number of businesses and platforms that allow you to use this agile and innovative means of payment continues to grow.
Will Fintech companies succeed in transforming the financial sector?
We are sure that Fintech companies will succeed in transforming traditional finance, especially if we see the growth in the number of companies and the number of intermediation in the US and UK, we believe that this will spread like a healthy epidemic in Europe and that we will soon see growth at an exponential rate in France, Italy, Spain and Germany, to name a few European countries where Fintech companies have not yet developed much.
Would you like to start FinTech transformation of your own business? Contact Enkronos team today.
