If you have ever transferred money online, checked your bank statement via phone or paid directly from an application, you are already a chunk of the multi-billion dollars’ industry. More precisely, Fintech. And it has already changed the finance industry of the world.
Fintech (short for Financial technology) covers all the companies that are using technology to provide innovative solutions to improve their products and services within the finance industry. The term may appear simple but it includes everything from cashless payments, digital currencies, retail banking and so. The global sector in the Fintech firms raised $22.8 billion in the first half of 2021 through investments.
Understanding FinTech
Back in time, Fintech was only referred to as the technology used in back-end systems of financial institutions. But, now it is used for wider applications such as trade stocks, funds and paying for your food using technology.
Not only are startups adopting this new system of lending and payment technologies for the majority of funding, but some of the biggest companies like Apple and Alibaba are going big on it as well.
Here, the question sits, what is the reason behind all of this investment?
Consumers are adopting Fintech at a very high pace. The reason being a lack of interest in the traditional banking industry, and the ease of use without needing brick-and-mortar to start. It gives consumers a direct hold of their financial lives.
What is the reason for the rapid growth of FinTech?
These factors have helped to fuel the massive growth of Fintech:
Quick adoption of technology
According to Statista, the current number of active smartphone users is 3.8 Billion, which means roughly 48 percent of the population owns a smartphone. With this rapid adoption of technology, people are embracing Fintech with open arms.
Generation Z
We can count Gen-Z as a reason for the rapid growth of FinTech. Most of the younger generation has grown up with technology in their hands, therefore they have a greater belief and enthusiasm in FinTech as compared to the older generations.
Needs of Small and Medium-Sized Enterprises
In the last few decades, it has been quite challenging for SMEs to acquire funds to grow their business. Fintech has eliminated this system of traditional financial systems. They can now get better access to funds and other bank-related services.
Internet Penetration
Around 40 percent of the population today has access to the internet. Affordable smartphones and the availability of the internet, both have been playing a crucial role in increasing the growth of Fintech services.
Affordability
All of the services provided by Fintech are more affordable than the traditional ones. For example, Robo advisors are way more economical than traditional asset managers.
All in all, Fintech services have been proven beneficial to fill the void for people who do not have access to traditional banking services. Now, thanks to Fintech, all we need is a phone to take insurance or a loan.
The risk attached to the Fintech industry
Like any growing industry, the Fintech industry also has some risks attached to it.
Data Privacy
Data privacy is one of the most major concerns. As most of the financial services go online, cyberattacks become a threat. They can invade the privacy and data of the users.
Synthetic Fraud
In the world of advancing technology, some people choose to make fake id and steal personal information. As it seemed easily identifiable in the past, is no longer a laughing matter.
Someone can easily access the bank account or sign up for products and services by using someone else’s name. This way they can borrow the digital identity and impact almost every organization.
What are the most active applications of Fintech in the world right now?
There are some most active areas of Fintech that need your attention.
Crowdfunding
People who do not have the access to the traditional banking system can use internet applications to send and receive money. Fintech has also allowed people to pool funds from different sources in one place. Today, if you need support without having to go to a traditional bank, you can go to the investor for help. Fintech has multiplied the number of crowdfunding platforms over the years.
Payments Made Through Mobile Phones
Almost everyone with a smartphone uses some type of mobile phone-based payments. Including the famous application, Venmo, some other technologies have emerged to exchange money and payments digitally. Be it online shopping or sending money to your friend, all can be done within the premises of a mobile phone.
Insurance Industry
Even the insurance industry has been taken over by Fintech. Insurtech includes everything from car insurance to getting insurance for your home. The whole process had been made a lot easier.
Robo Advisors
Robo advisors have invaded the assent management sector as they succeed to provide algorithm-based asset recommendations. Not only that, but they are also equipped to provide portfolio management. It has increased the efficiency of the task and cut down the costs to almost half.
Fintech is the Future – How?
In this no human contact period, people are switching to digital rather than traditional. Digital banking and online investments have provided these people with a ray of hope. It is high time that businesses opt for digital finance. The banking sector needs to buckle up and come to the market with its digital systems as well.
There is absolutely no doubt left about the scope of Fintech as the new technology is rolling out and consumer engagement is spiking the chart. Today, even if you do not realize it, FinTech has become an undeniable part of your personal and professional day to day life.
