Why is Fintech considered the Future of Finance?

Remember the last time you went to dinner and you and your friends split the bill using Venmo or Google Pay? Or you paid for your beverages using Apple Pay? Or that time when you paid for your Uber ride with your mobile wallet? You may not have realised but fintech has become an essential part of your as well as other people’s lives. 
But what exactly is fintech? How is it revolutionising the future of finance? Let’s find out.

Understanding Fintech

Fintech, or financial technology, is a term referring to any new technology that aims to simplify, digitalize, and automate the supply and usage of financial services. Fintech allows businesses, entrepreneurs, and consumers to better manage their financial operations and procedures by employing specialized software, algorithms, and applications on computers and smartphones.

Fintech platforms make routine processes like depositing checks, paying bills, and transferring funds between accounts considerably easier. Peer-to-peer lending, the evolution of crypto-currencies, and crypto exchanges are among the most technically complex ideas that are covered by Fintech.

Fintech today spans across a variety of sectors and businesses, including education, retail banking, nonprofit fundraising, and investment management, to mention a few.

Fintech is divided into five major categories by the Financial Stability Board (FSB), an international authority that examines and makes recommendations concerning the global financial system:

  • payments, clearing and settlement;
  • deposits, lending and capital raising;
  • insurance;
  • investment management; and
  • market support

The Evolution of Fintech

FinTech has been a resurging, fast-growing sector within the financial services industry for some years, driven by people who are inventing or innovating new technology to change the way financial markets work conventionally. Talking about everyday operations, FinTech has essentially changed the way major banks and traditional financial institutions operate. A multitude of smartphone apps that enable stock trading without charging consumers any fees for each trade are one easy illustration of the evolution of Fintech.

As more customers embrace the digital world, startups and new players in a variety of financial services are witnessing an increase in both numbers of users as well as income. As of today, Fintech has progressed from being only involved with startups to being an integral element of the various established financial institutions. In the face of the coronavirus epidemic, it has demonstrated its worth and importance. Only because of fintech were credit unions and banks throughout the world able to transact and provide COVID-19 assistance and services in a digital format. It should also be noted that fintech has made it much easier for payments to take place, as transactions through smartphones or smartwatches have seen advancements in the last few years.

Factors that drive Fintech Innovation 

Fintech innovation is not a new phenomenon. Credit cards were introduced in the 1960s, debit cards and cash dispensing terminals such as automated teller machines (ATMs) and telephone banking in the 1970s and 1980s, and new financial products were introduced in the 1990s with the deregulation of bond and capital markets. Internet banking introduced new branchless banking benefits and the opportunity to undertake remote banking operations that did not involve face-to-face interaction between customers and banks around the turn of the century.

With elements like digital currencies, internet banking, payment gateways, the emergence of bitcoins, fintech is making a revolution in the financial services industry and offering personalized service to its customers. Also, the changing consumer behavior has somewhat brought a wave of change in this sector. Government regulations are equally playing a crucial role at this stage to support a robust fintech system and promote healthy competition in the market. The introduction of cell or mobile devices has enabled new players such as mobile telephony, internet-based operators, and both hardware and software vendors to enter the market. With these developments came forecasts that indirect finance and financial intermediation would be replaced by direct finance, which would be less expensive and inefficient.

Fintech Innovation – The Future of Finance

Despite the fact that the financial services industry is not known for its agility, today’s customers and company owners want flexibility, quick iteration, and instant satisfaction. Fintech reduces the time it takes to do tasks that used to take days, weeks, or even months. You may now, for example, get a credit report or make an international money transfer with ease. Platforms like Upstart and TransferWise can accomplish these operations seamlessly, that too in a matter of a few minutes. Fintech also has the potential to expand financial inclusion since it can meet the needs of the financially excluded areas of the world, where government assistance is lacking.

Fintech’s potential to streamline complicated operations that were previously time-consuming is due to its emphasis on numbers rather than human talents and views. Many fintech systems blend conventional broker/advisors with algorithms. Others assist users in completing difficult financial operations without having to communicate with a person, thus eliminating the need for an intermediary. You may now apply for loans and mortgages directly online, bypassing the typical banking process. There is no longer a requirement for casual investors to meet with financial specialists in person to discuss the specifications of their portfolios. They can look up their alternatives on the internet or utilize chatbots to assist them in making selections.

Fintech, also known as financial technology, has taken the world by storm. Fintech companies are leading the industries now. They are integrating technology into offerings for financial services companies to make money management more straightforward and more efficient for them. Additionally, they are also improving their delivery to consumers.

Remember that to win trust from consumers and allow fintech to take over the market, there are still some challenges that the financial sector is facing, particularly in the regulatory and data protection areas. But don’t worry, things are looking promising for the fintech sector. 

Final Words

Fintech is changing the way we live and behave. It makes it possible to bank, trade, and exchange money online without having to interact with anyone. Fintech is as important to business leaders as big data, AI, blockchain, and other tech advancements. The emergence of fintech in a short time has had a significant impact on how we do business, transact with customers and think about the future. It has allowed advisers, bankers, and technology providers to offer services efficiently.

The future of fintech looks promising and is multiplying with the rise of startups in the fintech industry as well. For instance, in a recent report by Research and Markets in March 2020, India and China accounted for the highest adoption rate of fintech industries with 87%. The fintech market is on the rise and is definitely setting benchmarks. It is expected to rise by $6207 billion by 2025. 

The bottom line is that fintech is a significant player in the global economy, modern society, and business landscape. This field is rapidly expanding and appears to be here to stay.

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