How Does FinTech Work?

Several industry verticals such as healthcare education to banking, finance, and entertainment, are booming like never before, all thanks to evolving technology. Certainly, I won’t be able to cover every industry vertical but yes we can delve into one of the leading lines of business, i.e. the fintech industry. The following post focuses on what is the fintech industry, how collaboration in finance and technology works, and how is it beneficial in the long run.

Now I have come across many of you who are quite unacquainted with the term. Tell me have you ever split a dinner check on Venmo or come across the term called cryptocurrency used different apps to conduct proper budgeting or transferred money via several apps such as Google Pay, Phonepay, or any other? If you even check any one of these boxes then you have made adequate use of fintech.

What is Fintech?

Financial Technology often known as fintech is used when new technology is incorporated to enhance and automate the delivery and use of financial services. This rare combination is highly recommended to assist companies, businesses, and consumers in seamlessly managing their finances. With the inception of fintech, all kinds of tasks (small or large) can be improved and automated. So what exactly is fintech?

• A seamless integration of technology to enhance their services and come up with the best possible outcomes

• New markets are created now and then

• Technology is highly recommended to cut operational costs

• Robo-advisors, peer-to-peer (P2P) lending apps, payment apps, investment apps, and crypto apps.

Those who believe that fintech is a relatively new tech breakthrough are quite mistaken. It may quite interest you to know that the concept has been in vogue for quite a while. Can you recall the time when credit cards came into existence? I guess in the 1950s. With such innovation, the need for carrying hard currency was thoroughly reduced. Then we got acquainted with several other concepts such as stock trading services Paypal, and bank mainframes. Not just that today we have social media housed payment options and gateways, different blockchain networks, mobile payment applications, and whatnot!

Fintech is used by both large and small kinds of institutions such as banks, and highly specialized companies offering an amazing range of services and to be precise the future of fintech seems to be pretty bright. I came across an interesting post that emphasizes some of the most popular fintech services such as mobile payments are conducted by 50% of the population, online insurance by almost 25%, fintech platforms for investment purposes by 20%, financial planning by 10%, loan oriented digital services by 10% and these numbers keep on rising now and then.

From payments to corporate financial management, personal finance management, online exchange offers, credit companies, loans, blockchain and cryptocurrencies, and factoring, all these aspects are well taken care of by fintech.

Best Examples of Fintech Services

#1 Payments

The first and foremost example or use case of fintech services is seamless payments. Over years ago, entrepreneurs offering services with the help of the Internet were compelled to enter into agreements with banks for their valued clients. Fortunately, that’s not the case anymore! Everything today with the help of fintech services seems to have become much simpler and better where accepting and transferring payments is pretty easy and a doable job.

Not only that, but several non-financial organizations such as food delivery, movie tickets, registering hotels, and buying apparel and accessories are now capable of expanding their customer base, You see now funds are directly withdrawn from the cards and all this is done without the need for a mobile terminal. Today payment is possible with the help of your smartwatch as well. Simply bring the device near any wireless terminal and voila!

There was a time when conducting international transfers was quite a pain. Fortunately, this is not the case anymore. All thanks to PayPal, TransferWise, Stripe, and PaySend.

#2 Banking Services and Maintenance

The next successful example of fintech is banking services and maintenance. Today, banks are successfully expanding a wide range of services such as mobile banking, and new methods of working with clients. For instance, opening an account without even needing for the client to visit the bank office. Not to mention these technologies successfully tend to simplify and streamline a wide range of options.

The world of finance seems to have thoroughly changed. Today customer pays only for what services they use.

#3 Lending

Banks were once considered as the main source for lending and now there are several different sources found. Simultaneously, you will come across several startups that tend to ask for a hefty amount from these lending institutions. So yes fintech has eased the way banks used to lend money then and now.

#4 Insurance

Much like several banking and finance institutions several insurance companies have now begun incorporating the latest technology to enhance their classic insurance services. It may quite interest you to know that a startup named Spixii tends to install special sensors on the customer's cars to track their driving style precisely. The more extreme driving becomes the more extreme insurance will be needed. And if the client is driving calmly without violating any rules and regulations, special discounts are offered on insurance services and a larger compensation is paid.

Online insurance is developing at a high rate by leaps and bounds. It is quite believed that companies offering online insurance are attracting a larger and larger segment of the market.

#5 Cybersecurity and User Identity

Last but certainly not least is cybersecurity. Several researches reveal that cybercriminals can cause severe global losses, approx $10 trillion or more. And that’s the real reason why more and more large banks can deploy their cyber defense infrastructure precisely. Fortunately, there are so many ready-made solutions available that can work wonders in strengthening the infrastructure. Disruptive technologies such as predictive analysis, big data, and machine learning are quite taken into consideration.

How does Fintech work?

There is a wide range of fintech apps available which tend to work in different ways. Some fintech apps can just safely unlock financial account data and do nothing at all while some of them ensure that it is easy for the end users to track their investments irrespective of different platforms. Also, you will come across different wealth and financial management apps that aggregate well with financial accounts from different accounts offering an easy snapshot that showcases any and every kind of financial information in one place. These apps also assist well in suggesting different ways to enhance your financial position based on collected data.

3 Fundamental Pillars of Successful Fintech Project

#1 APIs

Financial APIs tend to connect consumer’s bank accounts to fintech apps in an extremely safe and secure manner. It is possible to share financial data, transfer funds, and verify their identities successfully.

#2 Mobile Applications

The next interesting pillar of the fintech realm is mobile applications. With the rise of mobile apps and devices, more and more fintech companies tend to offer mobile-based applications in such a way that users can seamlessly access their funds and insights at any given point in time. So whether it’s a digital banking app a financial management tool, or an investment platform, mobile apps have raised the standard and scope of the fintech realm.

#3 Web-based Solutions

Lastly, apart from mobile apps, Fintech also offers web-based solutions where users can simply log in with the help of their web browsers and complete their tasks.

Conclusion

So this is all for now! The scope of the fintech industry is widening and increasing now and then. Not to mention the future seems to be pretty bright like never before. I hope you did find the following post insightful. It would be a great help if you could share the post with your peers.

Good luck and keep watching the space for more information and updates on the fintech industry.