The term “Fintech” is becoming very difficult to define clearly. Earlier, it started as a specific term to explain tech startups that came to disrupt big banks after the Global Financial Crisis (GFC). There arises few questions, “What is Fintech?”, “What are its benefits and risks?”, “What kinds of Fintech products are there?” Go through this blog post to know about each of them.
What is Fintech?
Fintech is the use of technology for the financial services to develop or enhance different products and services in the market. Though the definition is applicable all the way back to introducing the first ATM in late 1960s, Fintech actually is term applicable to quick redesign of financial services after the GFC in the years 2007/08. Thus, from this viewpoint, we have already seen the latest technology is being used to set up the raft of new banking and lending products that have now become cheaper, quicker and more accessible to everyone.
What are some examples of Fintech technology?
- Peer-to-peer lending – This kind of lending usually takes place when a third-party company brings together people who need to borrow money from individuals or companies that are willing to invest. These borrowers will obtain an interest rate that matches the determined risk factor and the investors thus, get an attractive interest depending upon how long they need to invest for and their risk level.
- Unsecured small business finance – Fintech application development has already madesmall business finance much more accessible by offering different options to borrow without the need for residential or commercial property, in the form of a security. Generally, business loans are given by the banks that require a property to act as security, however Fintech has brought in new small business finance products that seem to leverage technology for improved approval rates or better flexible terms for increased accessibility.
- Robo advice – These are considered to be automated investment platforms that usually leverage Artificial Intelligence or AI as well as machine learning.Thus, Robo advisors will enable you to deal with an investment profile of exchange traded funds (ETFs) that generally depend on the selected investment amount, investment goals and risk appetite.
- Digital banks – This is also known as neobanks and challenger banks which can only be accessed through the smartphones. They are generally built with the latest technology and have smart features like in-depth analysis and spending insights, smart saving features, security features, multi-currency support and cashback.
- Cryptocurrency – These are currencies that exist digitally only and can be transferred in the most secured way. Just like the traditional currencies, they are not government regulated and rather produced by a public network.
- Digital wallets – Both Google and Apple provide Fintech products and these digital wallets offer a suitable way for making the payments. By allowing different devices such as – wearables and smartphones with near field communication (NFC) technology and then partnering with the banks, people can now make contactless payments.
What are the benefits of Fintech?
- Consider the price factor – The Fintech products might be available with lower prices that are better for the businesses and consumers. Thee lower prices can be due to the use of algorithms to access the risk factor of lending money to someone or due to the lack of legacy system.
- Easy access to financial products – According to Fintech app developers, the benefit of Fintech is increased access to banking and different lending products throughout the world. Small businesses might get benefit from better access to finance through these Fintech products. Thus, consumers can benefit from quick insight into their spending and better rates with risk-based pricing. Besides, automated investing provides people with the possible options other than savings accounts and people living in the regional areas will also be benefited without the need to go to a branch for conducting the bank transactions.
- Improve your personal finances – Different Fintech products try to improve your financial position and provide you with a better insight of your finances. Hence, neobanks and other banks provide spending insights and analysis with proper notifications to help you know exactly where your money is going ultimately.
What are the risk factors to Fintech?
- Newer companies – Several companies that are entering into the Fintech market will have less experience in the financial services when compared to banks. This will make it extremely important to know if the company has a valid license and can be contacted before applying for any products. You will also get benefited from going through financial documents like product disclosure statements and reviews to know you are properly informed about what you want to purchase.
- Less regulation – There are some Fintech products and companies that usually operate outside the traditional financial landscape and might be pending regulation or operating in a less regulated space. For example, small business finance providers will not need a credit license to provide business loans. So, there are consumer laws to keep you secured however, it is always advised to know how a company is licensed and regulated in case you are having any concerns with them.
What is a Fintech company?
Fintech app development companies are usually a kind of tech startups, but a Fintech company is said to be an organisation that uses newer technology to develop or enahnce financial products and services. This will consist of both banks and startups.
The banks have already experimented with the latest technologies that brought out innovative products and partnered with Fintech to step ahead Fintech innovation. Though every bank is not a Fintech, banks are developing Fintech products and adopting agile approaches used by the tech organizations. This will keep up with the pace of change and launch new products soon.
Thus, it is now becoming common for the banks, tech companies and Fintech companies that will work together to bring out Fintech products and services. Earlier, only disruptive players had been considered Fintechs, but now both startups and banks are fintechs when they change with the financial services. Contact Induji Tech fintech app developers for your business solution.