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It is fast becoming the talk-of-the-town in the business & technology world. Heavy investments are being made into the fintech industry and everyone wants a piece of this digital real estate.
According to fintech industry statistics, in 2020, $5.2 trillion worth of digital payments were made and this number is expected to reach $6.7 trillion by 2023 with a CAGR of 12.8%.
While businesses in the sector and fintech application development companies continue to grow and fintech applications become a household name, there are still a lot of things people are not aware of about fintech. Here’s what you might not know about fintech.
Everything you need to know about the Fintech industry
Traditional banks are worried because of Fintech
And with good reason – It wasn’t long ago when banks had a tight hold on everything money and because of this monopoly, there wasn’t any incentive for innovation. Fast forward a few years and it was time for new innovative & smaller fintech players to cause disruption in the banking industry. As innovation expert and Fintech VC, Arwind Sankaran puts it:
“We’re witnessing the creative destruction of financial services, rearranging itself around the consumer. Who does this in the most relevant, exciting way using data and digital, wins!”
So the more advances in fintech software development you see, the more headaches that are causing traditional bankers.
The Fintech Industry includes platforms you probably didn’t know about
Simply put, unlike traditional banks, fintech companies focus on specific financial transactions. The specialization allows them to work in a way that is efficient, streamlined, cost-effective, and guarantees a good customer experience via a web or mobile application.
These digital platforms include popular names such as PayPal & Square, which let you send & receive money online. Apps like Robinhood, with which you can trade stocks online. Cryptocurrency exchange platform Coinbase, allows you to buy & sell cryptocurrencies like Bitcoin, Ethereum, & Dogecoin. Stitch, that allows users to connect the apps to their financial accounts.
There are also some familiar apps but you hadn’t thought of as fintech. For instance; crowdfunding platforms like GoFundMe and Kickstarter are part of the fintech industry. When making payments via Patreon, you are using fintech.
Medicare-specific health insurance company Oscar also comes under fintech’s umbrella. It makes it easier to & transparent to make medical claims at a reasonable cost.
It has made banking accessible to millions of people
Many ask; is fintech is a good industry? To answer this; one thing financial technologies do a great job of is making financial services accessible to those who couldn’t benefit from them before.
This also means that for people who did not have a regular income and permanent address, financial technologies allow them to build wealth and improve their standard of living.
A perfect example of this was M-Pesa, released in Kenya in 2007. Which basically transforms your smartphone into a bank account. It allows users to make payments online securely and it also takes credit for reducing crime in a society that runs on cash and prone to theft. Since M-Pesa’s launch, more than 2% of Kenyans (200,000 households), have been brought out of poverty.
It is revolutionizing the loans market
Applying & receiving loans is another great example of fintech’s disruption of the banking industry. Traditional banks and financial institutions were busy complying with regulatory authorities and increasing their customer base only. Fintech startups, on the other hand, showed us how it all can be done better by focusing on the “client-first” notion.
Today, it is possible to compare the prices of loans more effectively via on-demand mobile apps and websites. These include P2P lending services like Prosper marketplace & LendingClub. Online business loans via Kabbage & Lendio. And fintechs that allow you to apply for mortgages online. Taking traditional brokers out of the equation and approving loans much faster.
In 2016, SoFi, an American fintech company that deals with student loans, became the first online lender to receive a AAA credit rating.
Fintech was originally used to describe the backend technologies of traditional banks
The word fintech was not as common as it is now a decade or so back. The first recorded use of the term was probably sometime around the 1970s.
It was originally used to refer to the back-end technologies of big financial institutions. It is kind of ironic that a term that was once the description of traditional banks is now like that dreaded knock on their door and is used to describe their competition.
The first successful fintech is a company we are all quite familiar with, PayPal, was launched in 1988 by one of the top 5 richest people in the world, Elon Musk.
Fintech is all around us. More and more people are using it more & more money is circulating via fintech applications. However, according to an Ernst & Young survey, 63% of people didn’t know of the term fintech. 21% said they had heard about it but they had no idea what it meant. Only 16% were able to define it but the definition was still vague. Hopefully, this article helped answer the what is fintech query.
If you want to know more about how to develop the best fintech mobile app, get in touch with InvoZone.