Every day, we have to deal with some kind of financial responsibility, whether it’s paying a bill, managing our stocks, lending money, or starting a retirement fund. There’s almost no escaping it. Because of this, it’s no wonder technology has been widely used to make our financial burden easier.
With financial technology, or Fintech, the way we manage our money has changed significantly since the 1950s, in more ways than you may be aware. Even today, new companies are creating ways to make financial management easier and in the palm of your hands.
What is Fintech?
Fintech companies are those that leverage new technology used to create better and new financial services for consumers and businesses. “Fintech” is used to describe any kind of business that may work with personal wealth management, insurance, payment, asset management, and more.
There has been a recent shift for those looking to manage their finances that has drawn people to using technology to help them with the task. With this push, Fintech startup companies directly help with traditional banking and financial institutions. In several countries around the globe, Fintech companies are slowly taking over, providing services and products that were once found only through financial institutions.
The shift we are seeing is that of a digital age. Tech-savvy individuals are seeking easy access, convenience, efficiency, and speed in every part of their lives, including their finances. Having the ability to make transactions from the convenience of a phone or other electronic platform is what is creating this strong push towards Fintech. Roughly 1 in 3 apps today are used by people to manage their finances.
Fintech is used to describe a wide range of services and products and has a relatively long history. With a name that has ‘technology” as a major concept, many think that it only refers to the most recent apps that deal with paying your bills without having to deal with physical currency, but technology has had a hand in financial management for years. Almost 65 years, to be more specific.
There is a boom in Fintech companies all over the world, from Silicon Valley and New York to Asia – financial hubs in Singapore and Hong Kong to Australia. These startups are offering tech-enabled payments, currency exchange, crowdfunding, online lending, and wealth management services.
In the 1950s, credit cards became one of the first Fintech developments, changing how we made our transactions and managed our wealth, eliminating the need to carry cash. ATMs sprouted in the 1960s, replacing human tellers and lowering the number of bank branches. Stock trading shifted in the 1970s with electronic stock trading, and in the 1980s, bank mainframe computers and sophisticated data and record keeping systems began to hold our daily records. With the rise of the internet in the 1990s, everything we knew changed. E-commerce business models rose and online stock brokerage emerged, which replaced using phone calls to exchange stocks.
As you can see, over more than 5 decades, Fintech has made a huge splash in the way we handle our daily finances. With this rise in technology, we are developing more sophisticated systems of risk management, treasury management, trading, and data analysis for banks and financial service firms. Many are probably unaware of how Fintech plays a large part in our daily happenings. The million dollar industry that supports the needs of the financial sector is sometimes not apparent to the retail banking customer.
Today, Fintech plays a large role in our daily lives with mobile wallets, payment apps, and even robo-advisors for retirement planning and wealth management. You can even find equity crowdfunding platforms for access to private and alternative investment opportunities.
Fintech in Action
There are so many ways that Fintech has influenced our lives, so it would be hard to give an example of all of them…but here are a few:
Mobile wallets and payment apps– Apps like Venmo and Apple Pay allow consumers to pay each other and businesses with a simple touch of a screen. The apps are convenient, secure, and are cheaper than transferring money between bank accounts and using checks. This kind of platform has become very popular among millennials.
One of the most popular ways people are using Fintech is through trading and investing platforms. Robo-advisors, AI, and other startups are making the process automated and easy. They are offering big savings and high returns with services that usually only provided to wealthy investors. They also allow beginners to use a small amount of capital to begin investing.
Robo-advisors– Companies like Betterment and Wealthfront are providing an alternative to traditional financial advisors. They provide a data-driven automatic investment plan for retirement planning and wealth management.
Artificial Intelligence and hedge funds– There has been a new hedge fund strategy that has emerged with recent technology. As computers become more necessary in quantitative hedge fund strategizing, some are relying solely on them. Artificial intelligence, or AI, is in the early stages of hedge fund managing.
Cryptocurrency – Cryptocurrency is digital money that uses cryptography for security. Cryptocurrency has the ability to make transferring funds easier between two parties. The transactions don’t cost much and allow users to avoid high fees experienced when using most banks and wire transfers.
Blockchain technology– With cryptocurrency comes blockchain technology. This creates decentralized digital public records of transactions that are secure, anonymous, and can’t be touched. It eliminates banks and brokers.
Cyber security– Fintech has worked to improve cybersecurity with the rise of cybercrime and decentralized data storage.
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