What is FinTech
What is FinTech
If you want to manage your money without ever having to go to the bank, FinTech is here for you. It basically moves all the lengthy processes and waiting time, and creates a virtual platform which you can use from any part of the world. FinTech is not a brand-new industry, but it evolved rapidly in the past decade. Only 48 fintech unicorns are worth $187 billion as of 2019 according to an article by Nestor Gilbert on FinancesOnline. This makes it very lucrative for many investors and entrepreneurs. The FinTech market is big and powerful with a lot of potential. It is an interesting opportunity to start a career if you’re graduating from college or you’re just looking for a new industry to work in.
How does it work
Innovative technology has always been integrated in some way in the traditional banks’ operations. Even though the financial world has been keeping up with innovation, now the FinTech industry is developing faster than ever. It offers sophisticated algorithms, machine learning, and the use of data analysis. This creates more efficient services for both individuals and businesses when it comes to their financial transactions, assets, and purchases. The number of apps and online services that can handle finances entirely independent of the brick-and-mortar entities is also increasing. This makes the FinTech very convenient, easily accessible, and much faster service than the bureaucratic bank system.
Types of FinTech
The major categories of FinTech as classified by Anne Sraders in the 2020 article on TheStreet.com are:
Crowdfunding platforms which are a convenient way of gathering funds, while eliminating the tedious process of going to a bank, applying for a loan, waiting for approval and having to pay an interest rate afterward. Instead, you can ask investors directly through sites like Patreon, GoFundMe, and Kickstarter.
Blockchain and cryptocurrency are a way of connecting buyers and sellers of different crypto coins on various online platforms. In recent years they have disrupted the industry with this innovative approach of trading virtual currencies which appreciated more than 1,200%.
Mobile payments are a way of transferring money without bothering about added service fees or converting different currencies if you’re sending money abroad. Apps like Apple Pay have eliminated all inconveniences around that process making it easier than ever to complete a transaction.
Insurance or Insurtech companies have also changed the traditional way of getting a life, home, or car insurance and through them, you can get insurance in a day instead of waiting for weeks for the tedious process to be completed.
Even though the stock exchange apps are around for some time and have transferred all transactions online, there is another disruptive technology in the asset management sphere and this is the Robo-Advising apps. Through their advanced algorithms, they help cut on costs and processing time for their users who can invest from anywhere with any amount of money while also generating the analysis of any financial portfolio of their interest.
Who uses it?
There are over 1.7 billion people in the world who do not have bank accounts but have access to the Internet according to a 2018 Forbes article by Niall McCarthy. They are mostly from Asia, Africa, and Latin America and FinTech is the most convenient way for them to manage their transactions.
Entrepreneurs, investors, and small businesses can also benefit from the innovative and fairly easy ways of obtaining credits through apps like Credit Karma which make the whole bureaucratic and complicated process faster and more efficient.
FinTech is mostly targeted at Millennials who understand and value the concept of the industry, increase in market size, and have constantly rising income. However, the Baby Boomers and Gen X have different problems when it comes to financial services and FinTech does not meet their needs according to the 2019 Investopedia article by Julia Kagan.
The industry is constantly improving and developing more ways in which it can enter our lives. Due to its rapid growth, there are many job opportunities in FinTech companies and start-ups and it sounds like a good way to kickstart a new career.
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Vesselina Tasev is a student majoring in Journalism and Mass Communication at American University in Bulgaria. She is interested in the development of the FinTech industry.
