FinTech or Financial Technology is a term used to describe an emerging sector in the financial industry that is involved in developing and implementing innovative technology to improve retail and business banking, cryptocurrency, financial education, investments and any area of the financial world that can benefit from technology. Anywhere that technology is applied in the financial sector including software, applications and processes is referred to as FinTech. FinTech really started to take off after the financial crisis of 2008 when disruptors and challengers began infiltrating the hold traditional banks had on finance. These new innovative financial companies offer services and products that make managing money more efficient, faster, easier and cheaper. Examples of FinTech include digital money and double-entry bookkeeping.
FinTech and the Internet
FinTech really came into its own when the internet became an integral part of everyone’s lives. FinTech grew exponentially as mobile technology surpassed PCs and people started to want access to their bank accounts via their mobile phones from anywhere in the world. At first FinTech referred to only computer technology that took place in the back office of banks and trading companies. Today the term is used much more broadly. As FinTech companies grow stronger they pose a threat to traditional banks, wealth and asset management companies and insurers.
Main Areas where FinTech Dominates:
- Electronic Money Institutions (EMI): These alternatives to traditional banks use financial technology to their advantage to have the edge over banks.
- Cryptocurrency: Blockchain technology uses Distributed Ledger Technology to maintain a record on a network of computers without having one, vulnerable central ledger. This is a perfect example of FinTech at work.
- Cybersecurity: FinTech plays a major role in helping to fight cybercrime. One of the ways this is done is through decentralized data storage. Cypersecurity is dependent on FinTech to protect financial institutions and transactions.
- RegTech (Regular Technology): Regular technology that is used to assist financial service companies in meeting compliance regulations such as anti-laundering laws and KYC protocols use FinTech extensively.
- AI (Artificial Intelligence): AI is becoming increasingly important in the financial industry and is an example of how technology can change finance dramatically.
- Insurance Industry: There is a trend for insurance products to be custom-made to suit the individual and his specific needs. To do this, insurers need to collect data on their customers; analyse it and offer their customers suitable products accordingly. To do this they make use of FinTech.
- Start-Ups: Increasingly banks, insurers, challengers and other financial institutions are investing in start-up companies that focus on FinTech. Alternatively, these giants in the financial world are setting up their own start-ups to develop the FinTech they need.
EMIs and FinTech
Electronic Money Institutes continue to grow in the financial industry and progressively more advanced start-ups are appearing. There is a large number of EMIs available to customers but they don’t all have the same technological capabilities or business models. Some EMIs are more advanced than others. The top EMIs offer advanced mobile solutions, online options and apps while other EMIs stick to basic technology. EMIs are a great alternative to traditional banks and with careful research you can find one that meet the needs of your company. Licensed EMI companies can offer e-financial services and solutions to private and business customers, surpassing the services traditional banks can offer.