Financial technology is a term used to describe the new wave of technologies that are transforming financial services and banking, including mobile payments, online lending, Robo-advisors, peer-to-peer lending, blockchain, cryptocurrencies, and more. The goal of fintech companies is to use these technologies to disrupt traditional banks and other financial institutions and create better products and services for consumers.
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Fintech is all about making money in ways that were previously impossible. It’s not just about using technology to make our lives easier, but also to change how we do business with each other, how we pay for things, and even how we save money. These changes will impact every part of our lives.
The first company to introduce the concept of fintech was PayPal back in 1998. Today, fintech has become a $400 billion industry. That means that it’s now one of the most important industries in the world today.
Let’s take a quick look at some of the top players in the global fintech market:
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• Coinbase – A U.S.-based digital currency exchange platform that allows people to trade bitcoin for fiat currencies (like USD) and vice versa. It’s one of the largest cryptocurrency exchanges, processing over $1 billion worth of trades per month.
• Robinhood – Provides stock trading services through an app called Robinhood. It started as a way for users to buy and sell stocks without paying any fees. They offer no commission on stock purchases.
• Wealthfront – provides automated investment management solutions based on the principles of behavioral finance. Their flagship product, Wealthfront 401K, automatically invests your savings into a diversified portfolio of low-cost index funds.
• Betterment – A personal investing tool that makes automatic investments for its users from $5 up to $10,000 within a variety of asset classes.
• Lending Club – An online platform where investors can borrow money against their homes and then lend out the difference. Investors can choose between fixed-rate loans and preferred shares, which provide higher returns than conventional bank deposits.
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• Funding Circle – Helps businesses grow by providing access to capital, typically in the form of debt financing, so they can expand. Businesses can apply via the website, and if approved, receive funding within 24 hours. Funding Circle uses a “crowdfunding” model to source the initial loan, allowing smaller borrowers to get funded faster.
• ZestFinance – Uses big data analytics to predict creditworthiness and determine interest rates for small businesses.
• Digit – Helps parents manage their children’s finances while protecting them from identity theft.
• Mint.com – One of the oldest and most well-known personal finance software providers offers both desktop and mobile apps that help you track spending, set budgets, build wealth, and much more.
• Acorns – Allows individuals to invest money to increase earnings. Earnings are added to a separate account, minus fees. When you spend money, those earnings are applied to future transactions. The site claims it can beat 90% of financial advisors.
• Venmo – This peer-to-peer payment system is used to send money to others. It’s owned by Facebook but operates independently; it doesn’t have an API.
• Plaid – A US-based direct banking solution provider that focuses on helping consumers with their everyday banking needs. It offers tools like bill pay, budgeting, and expense tracking.
• Simple Bank – Offers free checking accounts with no minimum balance requirements. You can also link multiple debit cards to your Simple Account.
• Square Cash – Square Cash company offering a range of products including merchant cash advances, point of sale systems, and mobile devices.
• Personal Capital – Online personal finance software helps people save time and make better decisions about managing their money.
• Intuit GoPayments – Payment gateway available for merchants who want to accept Apple Pay, Android Pay
• Stripe – It is an Online payment service that allows anyone to process payments through their website or app.
• PayPal – Online payments service that allows individuals and businesses to transfer money securely over the Internet.
• Xero – Online accounting software for small business owners.
• YNAB (You Need a Budget) – Software designed to help families manage their money by giving financial advice.
• Money Dashboard – Free online personal finance management software that provides real-time updates on your income, expenses, assets, and debts.
• Mvelopes – Provides users with a simple way to organize their bills, track their spending habits, and stay on top of their finances.
• BillGuard – Protects users from identity fraud by scanning all incoming mail for fraudulent activity.
• Credit Karma – Helps users monitor their credit score and identify ways to improve it.
• Prosper Marketplace – Another online lending platform that connects borrowers with lenders looking for long-term loans.
How Does FinTech Work
FinTech works in two main ways:
1. By using new technologies
2. By creating new services
The first method involves the use of new technologies such as artificial intelligence, machine learning, blockchain, and other emerging technologies. These technologies allow FinTech companies to provide innovative solutions to problems faced by traditional financial institutions. For example, AI enables FinTech firms to analyze data and automatically detect patterns. Machine learning and AI enable them to create algorithms that learn from previous experiences and then apply this knowledge to predict outcomes. Blockchain technology allows FinTech firms to develop decentralized applications which eliminate third parties and reduce transaction costs.
The second method involves the creation of new services. Services offered by FinTech firms include digital wallets, mobile apps, and online portals. Digital wallets are used to store cryptocurrencies and fiat currencies. They are convenient because they don’t require users to carry physical currency around. Mobile apps and online portals allow users to access their bank account information and perform transactions anywhere.
Striving for Financial Freedom
Fintech is one of the fastest-growing industries today. The number of FinTech startups has increased exponentially since 2010. In fact, the total value of FinTech investments reached $91.5 billion in 2021. Fintech is expected to reach $309.98 billion by 2022. This means that there will be more than 26,346 FinTech startups operating across the globe. As a result, many people have started exploring different opportunities in the field of FinTech. However, not everyone can make a living out of it. Below are some tips to consider before you start working in the FinTech industry.
- You need to understand how the FinTech industry works. There are several types of jobs available in the FinTech sector. Some of these positions include Financial Analyst, Accounting Manager, Business Development Executive, Marketing Director, Data Scientist, Software Engineer, Product Designer.
- Make sure that you possess certain skills. It is important to know about various software tools and programming languages. Also, you should have an understanding of business processes and the ability to work under pressure.
- Get your degree or diploma. If you want to pursue a career in the FinTech sector, you must get your degree or diploma. A bachelor’s degree is required for most entry-level roles. Master’s degrees are preferred for higher-level positions.
- Learn about the latest trends in the FinTech industry and keep up with the latest news. Read blogs, articles, and books related to the FinTech industry. Subscribe to newsletters and follow relevant social media accounts on Twitter, Facebook, LinkedIn, and Instagram.
- Start building your network. Networking is very important when looking for a job in the FinTech sector because most employers prefer candidates who already have experience. Therefore, you should join professional associations and attend networking events where professionals meet.
- Be open to new ideas. As mentioned earlier, the FinTech industry is growing rapidly. Therefore, you should always be willing to explore new ways of doing things.
- Always strive to improve yourself. Keep reading books, watching videos, and listening to podcasts related to the FinTech sector. Attend conferences and workshops where you can learn from other experts.
- Don’t forget to ask questions. Ask your colleagues, friends, family members, and mentors about their experiences in the FinTech industry so that you can learn from them.
- Build a portfolio. Create a website or blog where you showcase your work. Include links to your previous projects and explain what you did in each project.
- Showcase your accomplishments. Tell potential employers about all the awards and certificates you received while studying at college or university.
- Prepare for interviews. Practice answering interview questions until you feel comfortable.
- Take time off after graduation. Many students find it difficult to balance their studies and work life. Therefore, they end up taking long breaks between semesters. This may affect your chances of getting hired by a company.
- Be patient. The FinTech industry is still young. Most companies don’t hire fresh graduates right away. They usually give experienced employees first priority.
- Stay positive. In order to succeed in any field, you need to stay optimistic.
- Follow the advice given above. These steps will help you land a job in the FinTech industry.
The world of finance is changing every day. New technologies and innovations are being developed which make this industry more efficient than ever before. With these changes comes the requirement for new financial qualifications. Financial technologists are responsible for developing and implementing new solutions within the financial services industry.
Fintech Vs Traditional bank
Fintech is an abbreviation of Finance Technology. It is a combination of two words “finance” and “technology”. It is also known as digital banking. People use fintech to refer to online banks, mobile apps, payment systems, etc. Traditional banking refers to the process of providing financial services such as lending money, paying bills, investing, etc. Banks provide these services using physical branches, ATMs, credit cards, debit cards, cheques book, etc.
Traditional banking has been around since the Middle Ages. However, with the advent of modern technology, there has been a shift towards online banking. Online banking allows customers to access their accounts 24/7 without having to visit a branch. Customers can do everything through their smartphones, tablets, laptops, etc. This saves time and energy for both customers and banks.
In recent years, many startups have emerged in the FinTech space. These startups offer innovative products and services to customers. Some of the popular FinTech startups include Paytm, Freecharge, Mobikwik, Zomato, Ola Money, etc.
There are different types of fintech. Here we are discussing some of them:
- Mobile app-based fintech: Mobile apps are used to transfer money from one person to another. There are various mobile apps available on Google Play Store and Apple App Store. Some of the well-known apps include MobiKwik, FreeCharge, Paytm, OxigenMoney, etc.
- Digital Banking: Digital banking is a type of fintech that provides all the services provided by traditional banks in the comfort of your home or office. You can view your account information, pay bills, invest, withdraw cash, etc. All these features are offered through websites. Popular examples include NetBank, Airtel Money, Citibank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, SBI Cards, etc.
- Peer-to-peer Lending Platforms: Peer-to-peer lending platforms connect borrowers and lenders directly. Both parties benefit from it. The borrower gets cheap loans and the lender earns interest. Examples of peer-to-peer lending platforms include Commonfloor, BharatQi, Bajaj Finserv, etc.
- Robo Advisors: Robo advisors help investors choose the best mutual funds. They recommend stocks depending upon market conditions. Investors get returns according to the performance of the stock they invested in. The best part about Robo advisors is that you don’t need any prior experience.
- Virtual Currency: Virtual currency is a form of digital currency where transactions take place electronically. It is not controlled by a central authority like fiat currencies. Bitcoin is the first virtual currency that was introduced in 2009. Since then, other cryptocurrencies have come up including Litecoin, Ethereum, Ripple, Dash, Monero, etc.
- AI-Based Financial Products: Artificial Intelligence (AI) is a new technology that helps machines learn things faster than humans. Many companies are now leveraging this technology to develop better products for consumers. Some of the popular AI-based financial products include chatbots, predictive analytics, machine learning, etc.
- Blockchain: Blockchain is a distributed ledger technology that maintains an unchangeable record of data. The blockchain is the core infrastructure of crypto-economics. Anyone with an internet connection can use it to send money across borders quickly and securely. Because of its unique properties, it is considered as ‘the future of everything’.
- Regtech: Regtech is more focused on compliance using regulations. For example, KYC is a process when a user has to provide identity proof before trading/investing. Similarly, AML means Anti-money laundering, and FFIEC stands for Financial Industry Regulatory Authority.
- FinTech Startups: FinTech startups are businesses providing financial services through online channels if otherwise unavailable. FinTech startups include credit card processing, e-banking, investment management, insurance, mortgage, payments, remittance, retail finance, social lending, wealth management, etc.
- Open Source FinTech: Open source FinTech is the development of software applications with open code. In other words, anyone can see how the application works, why it works, and what could be done to improve on it.
Financial Technology Companies (Digital Platforms)
Some tech giants in financial technology at silicon valley are listed below:
- Stripe: Stripe builds tools and APIs that allow developers to build their own payment solutions. It offers two main products – Stripe Connect and Stripe Elements. With Stripe Connect, merchants can accept payments from customers who do not want to share their card details. Stripe Elements allows users to add custom forms to their website without having to worry about PCI Compliance.
- Wealthfront: Wealthfront is another company that builds technologies related to investing. Its flagship product is Wealthfront which lets people invest directly into their portfolio rather than going through intermediaries. Portfolios are created based on risk preferences, time horizons, and cost constraints.
- Square: Square provides small business owners with POS systems. These devices enable retailers to connect to smartphones via Bluetooth and cash registers to computers via USB ports. Merchants can also create invoices, track inventory, and manage employees. Square originally offered hardware such as point-of-sale terminals but later branched out to other industries like crowdfunding and peer-to-peer lending.
- Klarna: Klarna is a European fintech company headquartered in Stockholm, Sweden. Founded by Swedbank, Venture51, and Accel Partners, Klarna lets individuals pay for purchases in stores by connecting bank accounts, debit cards, or credit cards to mobile phones. By offering instant credit decisioning, Klarna aims to eliminate the need for paper bills and lengthy manual processes.
- Lending Club: LendingClub is a platform where borrowers (individuals or companies) can borrow funds from investors. Investors can earn a higher return per unit of capital than traditional banks because they have less overhead. Lending Club was founded in 2006 and is headquartered in San Francisco, California. The company went public in 2012.
- Funding Circle: Funding Circle is an alternative lender that originated in London, England. The site connects potential lenders with businesses seeking funding. Funding Circle has developed technology that monitors its members’ loan performance so that investors receive regular updates. Funding Circle is still relatively new, but it already has several hundred thousand consumers signed up as both borrowers and lenders.
- Zopa: Zopa is a peer-to-peer loans marketplace that enables individuals to lend money to one another. Users post their loan requests to the platform, which matches them with other users willing to provide financing. This service differs from conventional banking in that there are no middlemen taking a cut. Instead, each user pays a commission to Zopa when he/she posts a request. Peer-to-Peer lending may be ideal for some entrepreneurs!
- Robinhood: Robinhood started off as a way for ordinary consumers to trade stocks using only their phones. However, we now see many more startups entering this market. One example is Robin Hood, a financial services startup founded in 2015. They aim to democratize access to finance by allowing average citizens to buy and sell stocks without paying fees.
Startups in Fintech
Fintech is not just about new products and services. It’s also about new ways of doing things. Some business model approaches include crowdfunding, peer-to-peer platforms, and even cryptocurrencies. Here are a few examples of Fintech innovations.
- Crowdfunding: Crowdfunding allows people to contribute small amounts of money directly to projects that pique their interests. These contributions range anywhere from $10 to millions of dollars. Many successful crowdfunding target specific goals, such as raising awareness for certain causes, receiving donations for disaster relief, or creating innovative new products.
- Peer-To-Peer Platforms: Peer-to-peer platforms allow people to work together and take advantage of collective buying power. If you’ve ever heard of Airbnb or Uber, then you have seen how peer-to-peer models work. People rent out extra space in their homes, cars, etc., online and then use those resources to generate income. Content creators, photographers, and others can join forces to create a positive change in our society.
- Blockchain Technologies: Blockchain is a distributed ledger system that records transactions between two parties efficiently and in a verifiable manner. For example, if I wanted to send you $100, I might go to your bank account and transfer the funds; however, my transaction would be recorded on a public database called a blockchain. Once recorded on the blockchain, your bank account could never be debited incorrectly because the record has been verified by an independent third party. The technology behind Bitcoin was invented in 2008. Since then, it has become increasingly clear that many industries and institutions will soon adopt blockchain technologies.
The world of finance is changing
Fintech is predicted to grow rapidly over the next decade. New applications will emerge that leverage the power of data analytics while enhancing the customer experience. In addition, the rise of artificial intelligence and machine learning will lead to better algorithms and greater automation. Finally, blockchain technologies will continue to disrupt the financial industry. FinTech is all around us. Mobile device makes business easier than before. From mobile apps to social media to smartphones, the digital age has transformed almost every aspect of our lives. But this wave of technological advancement has also changed the way we conduct business and interact with each other. Financial technology (FinTech), which includes everything from mobile banking to virtual currencies, is driving much of this change.
The future of finance will be defined by innovation. We’re already seeing some of the early signs of what’s to come. As the fintech revolution continues to gain momentum, we’ll likely see more companies enter the market. And with the emergence of new technologies like cryptocurrency, there will be more opportunities to make money through investing. So, whether you’re looking to start a career in the field or simply want to learn more about it, here are some great places to get started.
Banking Industry Trends
Fintech Startups Are Changing How Consumers Bank
Today, consumers can choose among dozens of different banks and credit unions. Back in 1980, when personal computers were just becoming popular, only eight banks existed. Now, there are thousands of options for consumers to choose from. This growth has led to fierce competition among banks. To stay competitive, they must offer unique services and products. One way they do this is by partnering with startups. Banks and startups are working together to provide innovative solutions to consumer problems. These partnerships have created entirely new ways for people to manage their finances. They’ve also helped startups develop new products and services. Some examples include:
- Online banking – Many banks now allow customers to access their accounts online. With online banking, consumers can check balances, pay bills, transfer money, and even deposit checks without having to visit a branch office.
- Mobile banking – Today, nearly half of U.S. households use mobile devices to view their bank statements. Mobile banking allows users to quickly check their balance, pay bills, and transfer money anywhere at any time.
Blockchain Technology Is Disrupting Banking
Blockchain technology is changing how businesses operate. It’s a distributed ledger system that records transactions across a network of computers. Since no single entity controls the database, fraud is virtually impossible. Because the information is shared publicly, trust is built into the process. Companies are using blockchain to improve efficiency, reduce costs, and increase transparency. Here are three industries where blockchain technology is disrupting the status quo:
Cryptocurrency Will Continue to Evolve
Cryptocurrencies are digital assets designed to work as a medium of exchange. The most famous example is Bitcoin. Other cryptocurrencies include Litecoin, Ethereum, Ripple, Dash, and Monero. Unlike traditional fiat currency, these digital assets don’t rely on a central authority such as the Federal Reserve System. Instead, they’re controlled by an open community of individuals who validate transactions via consensus. While many investors believe that cryptocurrency prices will eventually decline, others believe that the value of cryptocurrencies could continue to grow over time. In fact, one study found that if all current cryptocurrency owners sold their holdings today, it would create $2 trillion in wealth.
FinTech Innovation Has Already Transformed Financial Services
FinTech innovations have already transformed financial services. In fact, according to the latest fintech industry report, more than 25.6 billion was invested in FinTech companies in H1 2020. By 2025, investments in FinTech are expected to reach around $305 billion globally, according to GlobeNewswire.
Regtech Fintech Startups Are Changing How Banks Do Business
Regulatory requirements are forcing banks to change the way they conduct business. As regulations become increasingly complex, some firms are turning to fintech companies for help. FinTech startups are developing tools that make complying with complex rules easier for banks. For instance, startups like Branch are making it possible to instantly open a virtual account and receive funds within minutes.
New Tech Tools Are Helping Consumers Manage Their Money Better
New tech tools are helping consumers manage their money better. Mobile apps, online portals, and smart speakers are becoming more popular ways to manage finances. Apps such as Digit and Mint connect consumers’ checking and savings accounts to provide real-time access to spending and saving activity. Online portals offer similar features but only focus on managing a consumer’s checking account. Some platforms, like Acorns, round up purchases from different credit cards and place them into separate investment accounts.
New Tech Platforms Are Creating More Opportunities for Entrepreneurs
New tech platforms are creating new opportunities for entrepreneurs. One platform, called Stripe, allows small businesses to accept payments without having to build out infrastructure or learn about payment processing. Similarly, other platforms are providing software solutions that allow people to start their own personal finance management companies.
New Tech Platforms Can Transform the Way We Think About Personal Finance
New tech platforms can transform the way we think about personal finance. Many of us spend hours each month tracking our budgets and incomes. But what if there were a simpler solution? What if there was a service that allowed you to automatically track your income and expenses and then give you actionable advice about how to improve your situation? This future is starting to come true thanks to new technologies. Companies like SimpleHoney are offering automated budgeting and planning software while companies like LendingTree are connecting lenders with borrowers so that everyone wins.
New Tech Platforms Could Revolutionize the Way We Save Ourselves
New tech platforms could revolutionize the way we save ourselves. According to Bankrate, nearly half of Americans now use mobile banking apps. Open banking standards are allowing institutions to share customer data between themselves, which means customers can see all of their accounts in one place. And new tech platforms are giving individuals control over their data by offering self-sovereign identity solutions. The result is that we are gaining greater transparency in our finances.
New Tech Platforms Will Make It Easier for People to Invest
New tech platforms will make it easier for people to invest. Robo-advisors like Wealthfront and Betterment are automating much of the work involved in investing. They take care of everything from research to tax preparation. In addition, Robo-investors have lower operating costs than human financial advisors because they don’t charge fees. Robo-investing also makes it easier for investors to diversify across multiple asset classes.
New Tech Platforms Have the Potential to Improve Society
New tech platforms have the potential to improve society. For example, many people struggle to pay off student loans. A platform called SoFi has created an app that connects students with private loan refinancing. By combining traditional lending with modern technology, SoFi helps borrowers avoid default and refinance at lower rates. Other platforms are using AI to identify fraudulent behavior within the financial services industry. These efforts help protect consumers from scams and fraudsters.
New Tech Platforms Are Making Financial Services More Accessible
New tech platforms are making financial services more accessible. Some platforms, such as Robinhood, offer free stock trading. Others, like Zelle, provide instant peer-to-peer payments. Still others, like Venmo, allow users to send money to friends and family without having to go through banks or credit card networks. All of these innovations are helping to increase access to financial services.