What’s the big deal about fintech?

Fintech is a term that originated in the financial sector, which refers to an institution's technological capabilities. Today, the word fintech is being used to describe new financial services and companies. 

The Internet and mobile devices have truly transformed most facets of daily living. New technology is now also shaking up the banking sector, bringing new ways to conduct transactions and handle payments.

What brings this revolution?

Fintech has grown rapidly in recent years, fuelled by blockchain, peer-to-peer models, and crowdfunding. Investors are always looking for new ways to disrupt the bank monopoly. 

Apart from banks, very few financial institutions had access to financing businesses and consumer loans until now. But now, there are many more options to fundraise as well as invest in lending to others. Peer-to-peer loans on sites like Upstart or LendingClub not only help borrowers save, but also open up new opportunities for investors. 

Platforms like Kickstarter and Indiegogo allow for the establishment of numerous initiatives, backed by numerous small payments from the public. This generates an increase in many companies and goods that couldn't get enough funding from traditional sources. 

How do fintech transactions take place?

Aside from obtaining funds, the most significant shift is in transferring them. Today, non-cash transactions can be made in a variety of methods. Fintech is used in traditional trade to handle card payments quickly and cheaply online and offline. Apple Pay and Google Pay eliminate the need for cards for contactless payments. Virtual wallets like TransferWise provide speedy and affordable money transfers, attracting clients like Western Union. 

What contributed to the success of fintech?

Banks are not known for their transparency or customer service. However, most fintech apps are far more user-friendly and transparent than traditional bank apps. Fintech firms specialise in providing solutions that defy outdated banking standards. Client-focused, fintech solutions make it easy to use services. 

Fintech is not just a technological innovation. Entrepreneurs are generating market products like never before, employing financing structures no one has thought of. That is why there are circumstances where enterprises update outdated and unsuitable legal regulations. 

Popular Fintech product solutions

Robinhood

California's Robin Hood doesn't rob anyone, but does offer an opportunity to gain. The firm wants to make it easy and transparent to invest in listed companies without commission. Since 2018, the service has been used by over 3 million people, with an average age of 26. The company has succeeded to attract youthful, non-interested investors. 

Lending Club

A San Francisco firm, Lending Club was the first to offer peer-to-peer loans. Currently the market's largest fintech startup, it handles 38 billion dollars in loans for over 2.5 million customers. Lending Club was one of the original apps on Facebook before becoming a platform. This changed in 2007 with a $10 million funding round. 

Stripe

Stripe's mission is to make online payments as simple and secure as possible. It provides an API that can be used by existing apps and websites to process online payments. This year, the company released solutions to help prevent fraud that work alongside their interfaces. 

NerdWallet

Another Silicon Valley startup. Its founders, Tim Chen and Jacob Gibson, aim to enhance everyone's financial situation. Their website educates consumers and helps them find the best credit cards, loans, and credits. NerdWallet's key benefit is comprehensive summaries and comparisons of market offers. 

WePay

In 2008, Rich Aberman and Bill Cleriso started WePay. It supports crowdsourcing, stock markets, and small businesses.  During Aberman’s brother’s bachelor party, he noticed how difficult it was to collect various amounts of money from the guests. He primarily used PayPal at the time, and found the process difficult. This led to starting WePay. 

Their ideas immediately attracted investors, including PayPal co-founder Max Lavchin. The founders struggled to keep up with the rise of peer-to-peer transactions as time went on, focusing on payment processing. 

Square, Inc.

Square  is a payments startup founded in 2009 by Jack Dorsey and Jim McKelvey in San Francisco. Their Apple and Android apps accept card payments through tablet or smartphone. With Square Reader, a card reader attached to the device's jack, or Bluetooth LE, data from the card can be manually entered. It also offers a Cash App for exchanging money orders between users and tangible virtual gift cards. 

How will fintech evolve?

Automation may see a breakthrough in the industry. Automated learning pushes us closer to machine decision-making. This includes not only repetitive transactions and procedures, but also data-driven investments. 

Also, large financial institutions are becoming more aware of the threat posed by fintech companies. Instead of letting go, the large fish in the sea prefer to take on smaller competitors. This was exactly why JP Morgan Chase, one of the world's largest financial holdings, bought WePay. 

The fintech branch must also unify systems and share information freely. Solvency and transaction history are valuable data that allow bigger loans to be given faster and partner reputation to be evaluated quickly.