Today, fintech is altering the financial space as we know it – now more than ever, the financial industry is focused on implementing modern technology in their business processes.
According to a 2018 report published in one of the Carsurance infographics, investment in fintech has risen to more than $50 billion across 875 deals alone. The same infographic goes ahead to report that in 2017 alone, the fintech industry raised a whopping $60 billion in funding.
If you’re not familiar with the term fintech, don’t worry, here’s a simplified explainer for you – fintech (a portmanteau of ‘financial technology’) refers to a technology in the finance sector. In other words, fintech assists businesses and their customers to effectively manage financial operations and processes through the use of a computer or mobile applications.
Additionally, there has been a lot of reworking of various rules and regulations in the financial sector, as well as a shift in consumer behaviour. This indicates a definite growth of fintech in the years to come.
The impact of fintech on businesses
The rise of fintech has brought to existence new ways of doing business. Gone are the days when businesses would rely on banks and investors for funding. The technology has brought about mobile payments, crowdfunding, internet banking, and more, all of which decentralize financial services to the business and consumer levels.
The cost of funding and expanding has also gone down. Think about the Initial Coin Offerings (ICOs), a method of funding blockchain startups. The method only requires one to have an idea, a whitepaper for it, a basic team, a website, and it’s good to go.
Another example would be crowdfunding, which makes it possible for startups to raise funds from anywhere around the world without the need of having to physically meet the financiers or the shareholders.
With this technology, businesses can directly pitch to potential investors without having to wait for weeks or months, something the older financial system never took much consideration for. And if a pitch is successful, ideas get funded only within days or weeks.
Additionally, money transfer services across borders is also another huge innovation in fintech. Businesses can now comfortably exchange funds without geographical limitations. This has especially made life much easier for business owners with online stores.
Buyers browsing the internet can now purchase and pay for a product being sold continents away – thanks to fintech companies such as TransferWise. The service allows businesses and individuals to send and receive money globally at affordable rates as compared to traditional banks.
The list of fintech innovations for businesses is quite long, but as you can clearly see, firms can save money while operating more efficiently. Since most fintech companies have lower operational costs due to their agility, the same can be transferred to the pricing of their products and services.
And what’s more, they can scale up very fast due to the innovative nature of doing things. This remains a challenge to most conventional financial institutions.
The impact of fintech on customers
When we talk about fintech for consumers, we have to bring in mobile technology. The invasion of mobile phones marked a huge milestone in the fintech space.
Thanks to the wide internet coverage around the world, people can now easily access various services using mobile and desktop applications anytime and anywhere.
The consumer behaviour was immensely altered by the entry of mobile phone in the tech space. Today, internet users can access their critical financial information faster and privately at the comfort of their homes or when travelling.
Consumers nowadays prefer convenience in everything they do. They prefer accessing banking services the same way they check social media pages or browse the internet. Fintech companies have given them just that.
Currently, it is easy for you to access your money from the comfort of your living room or spend it on online products and services, all thanks to the financial innovations being seen today.
Speaking of convenience, with the current wave of virtual currencies such as Bitcoin and Ethereum, everyone can now store money safely in digital and physical wallets and carry it with them anywhere they go without the risk of being mugged.
Consider a scenario where businesses would shift to mobile-based payments rather than using credit and debit cards. Most financial institutions charge the consumers very high costs associated with these cards, and in the end, one ends up with less to spend and more to pay the card issuer.
If, on the other hand, cheaper and more convenient options such as mobile applications or online payment systems would be adopted, the consumer would be spared a lot of unnecessary expenses. She would only need to use her mobile devices, something she already owns.
Fintech came to level up the playing field by giving the consumers a cheaper and convenient alternative to what they were used to.
As you would expect, this has forced most financial institutions to up their game and live up to the expectations of the consumers because, at the end of the day, the consumer isn’t so much interested in who is offering this or that service. Perhaps all they require is a service that’s affordable, convenient, and reliable.
Even with all the milestones made in the financial sector, fintech is just but started. Most of what is seen today is the beginning of bigger things to come. The modern-day financial technology has made the impossible possible.
One would imagine you to be crazy if you told her 10 years ago that she would be able to raise funds for her businesses virtually within minutes. And would you think of a world with digital currencies not controlled by the government just two decades ago?
This is why the modern-day individual or business cannot afford to operate without fintech simply because it has become a part of our lives. Staying up to date with the latest technologies in the financial sector offers businesses a competitive tool today, and this is why we believe you need to embrace fintech now more than ever.