Fintech, short for ‘financial technology,’ is applying the latest technological advancements to services and products in the financial industry. The term has sprung up during the end of the last decade and encapsulates a rapidly growing industry. It caters to the interests of both the business and consumer in various ways. The latest surge of mobile banking, investment apps, insurance, and cryptocurrency apps comes under fintech.
The industry is enormous, and one reason behind its rapid growth is the high technology adoption rate by traditional banks. They are constantly investing, partnering, and acquiring fintech startups. And banks and financial institutions are doing so because their digital-supporter customers want new-age services and products.
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How does fintech operate?
While fintech has become a popular term today, the industry is not new. Looking back, you can find traces of technology in the financial world, and credit card introduction in the 1950s or ATMs are significant proofs.
But the fast growth of fintech companies worldwide has increased the industry’s susceptibility to vulnerabilities, specifically cyberattacks. Given the situation, there is a strong push to develop better fintech to detect and mitigate cyber threats. The latest advances in the field are machine learning algorithm deployment, blockchain technology, and data science that detect cyber threats.
According to Sloboda Studio, the Stripe integration in rails system is a great example of how innovation is successfully used in the financial industry.
Some examples of fintech and their applications
Let’s take a look at how fintech is encouraging and disrupting some areas of finance.
Banking
Mobile banking occupies a massive share of the fintech industry. As technology advances and a global pandemic transforms the social fabric, consumers are asking for digital solutions to access their accounts. Sufficing their needs, banks are now providing mobile banking apps where consumers can access all the banking services. These apps offer money transfers, credit score checks, applying for loans, paying their mortgage, etc.
Investment
During the last couple of years, there has been a staggering increase in the number of investment and saving apps. Companies like Robinhood, Acorns, and Stash make it easier for a layman to invest their money. While each app is different, they all use a blend of automated small-dollar investing procedures like instant round-up deposits on purchase.
Payment methods
The Fintech industry has mastered the art of moving money around. Payment apps like Venmo and Google Pay are currently the most popular payments platforms worldwide. These platforms have made it superbly easy to send or receive money from the other end of the world. Other recognized payment platforms are Stripe, PayPal, Square, Zelle.
Cryptocurrency and blockchain
Blockchain technology and cryptocurrency have taken the fintech industry and the world by storm. Even though blockchain and cryptocurrency are technologies considered outside fintech, both have a role in shaping new applications in the fintech industry. Blockchain technology allows cryptocurrency mining and crypto market existence. And with major banks and financial institutions investing in blockchain technology, it is quickly entering the mainstream fintech business.
Insurance
Insurance is the slowest of all fintech branches to adopt technology, yet, the industry is on a quick stride. Several new fintech companies are tying up with insurance businesses to help them automate processes and grow their customer base. Mobile car insurance solutions, wearables for health insurance – the industry is quickly bringing new solutions for consumers to access insurance services.
Concluding note
Apart from these fintech branches, there is also a focus on cybersecurity since the finance sector is a big target for cyberattacks. Banks are heavily investing in new security solutions like identity verification during customer onboarding. Such solutions rely heavily on artificial intelligence and machine learning. To develop a specialized model, the algorithm is fed billions of data points to learn how to tell if an id is fake. It helps banks to prevent any cyberthreat from breaching their banking ecosphere.
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