FinTech: Review on Financial Technology
- Accoridng to the Business Research Company, the global market value of fintech is expected to reach $309.98 billion by 2022 at a CAGR of 25% which was valued at $127.66 billion in 2018
- Growth in the digital payments sector is driving the market for global Financial Technology (Fintech)
- According to CB Insights, Fintech startups received $17.4 billion in funding in 2016 and were on pace to surpass that sum as of late 2017 and there were 39 VC backed Fintech unicorns worth $147.37 billion by the end of 2018
- In 2018, the fintech market size of Asia challenged top spot internationally, collecting a record amount of funds: $22.65 billion out of 516 transactions
What Is Fintech (Financial technology)?
Fintechis a new tech that helps to improve and automate the distribution and use of financial services. Fintech is mostly used to help companies, business owners and consumers tomaintain their financial operations, processes, and lives by utilizing specialized software and algorithms in better way which are used on computers but mainly smartphones. Fintechempowered devices are changing the way consumers track, manage and facilitate their finances.
Every year, an increasing number of people worldwide are using fintech. In the U.S. 64% of millennial and 59% of Gen Xershave at least one complete service banking app on their phone. Fintech firms in US on 2018 alone raised an unprecedented $39.6 billion.
As per the EY’s 2017 Fintech Adoption Index, almost one third of consumers uses at least two or more fintech services and those consumers are also highly aware of fintech as a part of their day to day lives.
Most of the fintech startups are produced by North America and Asia as relatively close to second. Global fintech funding in the first quarter of 2018 let by an outstanding uptake in deals in North America. Asia, which could exceed US in fintech deals, also saw a spike in activity. In Europe funding activity was at a five-quarter low in first quarter of 2018 but surged back in second quarter.
Here are some of the most active areas of fintechinnovation:
- Digital cash and Crypto currency.
- Block chain technology, which includes Ethereum, a distributed ledger technology (DLT) that helps to maintain records on a network of computers with no central ledger.
- Smart contracts, which uses computer programs to automatically execute contracts between buyers and sellers.
- Open banking is a concept where third parties should have access to banking data and info that create a connected network of financial institutions and third-party providers. For example the all in one money management tool called Mint.
- Regtech, that help financial service companies to meet industry compliance rules, mainly those covering Anti Money Laundering and Know Your Customer protocols which looks afterfraudulent activities.
- Unbanked or under banked services that seek to serve low-income individuals who are underserved by traditional banks or mainstream financial services firms.
- Cybersecurity, the propagation of cybercrime and the decentralized storage of data.
Different types of Fintech along with top Fintech Companies
According to the data provided in finance online, 96% of the consumers are aware about at least one alternative financial technology servicestoday, where they use them for making payments or transferring money. This data shows that the entire world is aware of fintech technology. Here are some major examples of fintech firms today under different types of financial technology.
1. Payment gateways
Electronic payment systems had been used even before e-commerce was into existence. These online payment gateways have reformed payment, making it easy and highly accessible for all. The most notable benefit of payment gateways is that they allow people to send money without the need for a bank. Payment gateways have given consumers considerable benefits and savings by removing the expensive bank fees.
Here are some of the most popular online payment gateways.
PayPal is one of the leading online payment systems mainly in electronic money transfers which was founded in 1998. This U.S.-based payment gateway with over 286 million active account holders, operates in over 200 markets worldwide and in over 100 currencies. The total revenues of PayPal for 2018 reached US$15.45 billion.
In digital payment systems, Authorize.Net is another “old-timer” among online payment providers which was in operations since 1996. This is now owned by Visa that focuses on providing electronic payment services to SMBs.
Founded in 2005, Payoneer is the mass payment gateway of alternative by large global firms such as Google, Up Work, and Amazon. It mainlyprovidesonline money transfer, digital payment services and other popular B2B payment solutions.
2. Mobile Payments
With over 5.11 billion different mobile users worldwide, it’s not surprising that global mobile payment transactions is expected to exceed US$4.3 trillion by 2023.Fintech companies are constantly making their products and services better to improve consumer service everywhere. Advancements in mobile wallet technology and digital verification are motivating these developments.
Here are some of the examples of leading mobile payment systems.
This widely used mobile app is handling around $12 billion worth of transactions as per2018.Venmois a Paypal subsidiary that allows users to easily transfer funds and make payments using their mobile phones at millions of establishments worldwide.
Revel Systems is iPad-based and seamlessly processes mobile payments which makes one of the world’s favorite retail POS systems, mainly used in restaurants, QSRs, grocery stores, etc.
Apple Pay is a digital wallet and mobile payment service made by tech giant Apple, Inc., that supports in person contactless payment online and via iOS apps. This payment service can accept even non Apple Pay terminals to support mass payments.
3. Budgeting / Personal Finance Apps
People used to take the time to calculate their expenses and make appropriate budgets. Today all thanks to budgeting apps that has made monitoring expenses and planning budgets easy and more efficient.
Moreover, one of the most used fintech offerings till now is a mobile budgeting app which have truly transformed how consumers see and perform their financial activities. Here are some of the examples.
Founded in 1983, Intuit is made by Palo Alto, who also made the award-winning budgeting app called Mint .It is a CA based company that specializes in financial ,accounting and tax preparation apps and services. The total revenues for 2017 was US$5.17 billion.
Based in Irvine, CA, this fintechfirm specializes in micro-investing services. Acorns mainly focuses on helping users to make passive investments on exchange-traded funds.
Wally is a Dubai-based fintechfirm and one of the popular and easy to use personal finance app. It was initially available only on iOS, but the company recently launched an Android version called Wally+ in order to expand its user base. This app generally helps users to make easy income vs. expense comparison as well as set and meet finance objectives.
4. Consumer Banking
At this age and day, about 1.7 billion adults don’t have a bank account or access to a mobile money provider. This happens because traditional banks had been operating in ways that marginalize many impoverished individual. To address this long-standing issue, Fintech’s alternative consumer banking products and services are designed. Let’s have a look at some of its examples.
This trendy banking app provides trouble free banking for millions of individual. Besides offering dependable and affordable debit accounts, this fintechmaintains the biggest retail cash deposit network worldwide.
Established in 1999, Netspend had served almost 68 million underbanked individuals. This fintechmainly uses special devices to provide financial freedom, security and convenience to the users.
It offers a flexible smart banking platform which allows banks to lower customer acquisition costs, boost new revenue generating sources, and reduce customer churn rates. It uses advanced financial analytics, behavioral science, and big data to design new innovative banking apps.
5. Robo-Advising and Stock-Trading Apps
In current years, robot advising has transformed the asset management sector. This new innovative fintech service uses smart algorithm technological system to provide spontaneous asset recommendations.With the use of this app, financial advisers can now analyze numerous portfolio options efficiently for 24/7 .So, this not shocking fact that an increasing number of robo-advising services continue to grow.
Another highly innovative fintech contribution is the invention of stock-trading apps. In past, investors must visit stock exchange physically to buy and sell stocks but today, stock trading solutions allow investors to easily trade stocks on their smartphones with cheaper and low-minimum stock-trading apps in the market. Here are some of these apps.
Controlling US$1.3 trillion in theindex funds, Vanguard Group and Fidelity Investments has become a market leader in robo-advising field. For managing huge assets, it is among the pioneers in using block chain technology and recently it has made the majority of its online trading activities free of charge.
Headquartered in Menlo Park, Robinhood creates cash management apps mainly for crypto currencies, stocks, options, and EFTs. This digital app has helped to promote the zero commission business model in the online brokerage business.
Charles Schwab is the largest publicly traded e-broker with services of 12 million brokerage customers. This is a San Francisco based stock brokerage fintechwhich has recently removed online stock trade commissions to improve and broaden its profitability.
6. Blockchain and Crypto currency
If there are fintech innovations that truly stand out from the rest, then it isblock chains and crypto currencies because these new technologies are providing great potential to improve various industries.
Moreover,many established organizations from various industries have already achieved significant advantages from blockchains and crypto currencies including cost reduction, faster transactions, enhanced efficiency, better traceability, increased transparency and improved security. As per Experts blockchain products are likely to change how future deals will be executed.
Luxembourg based crypto currencyfintechproduces the popular BlockchainWallet that is considered to be the easiest ways to store, invest, and trade crypto currencies. Trusted by more than 402 million wallets, it has managed over 100 million transactions involving users from across140 countries.
Coinbaseis an online marketplace that maintains the world’s largest crypto currency exchange, used by more than 25 million users from across 32 countries. It allows users to sell, store, and purchase crypto currenciessuch as Ethereum and Bitcoin cash
This is a cryptocurrency exchange app that offers one of the safest methods for cryptocurrency buying and trading across a various range of crypto markets. It has also developed a mobile trading app that supports many features.
7. Peer-to-peer lending/Crowdfunding
Crowdfunding networks allows users to receive or send money online or through mobile apps. They enable business firms or individual entrepreneurs to easily use one location to pool funding from various sources.
It has now become possible for startups to directly reach out to investors for help rather than try to secure loans from a traditional bank. Also, a donor management appscan be used to enable better handling of P2P lending transactions. Here are some of the well-known crowdfunduing companies,
Established in 2009, this New York based crowdfundingfintech has received over US$4.5 billion in contract and has successfully funded over 171,000 projects to now. Kickstarter has an average success rate of 37.31%.
GoFundMe is another leading profit crowdfunding firm that has raised over US$5 billion. All of its projectsare mainlycommunity based projects which are backed up by a community of over 50 million donors worldwide.
Upstart was founded by former Google employees. This is a peer-to-peer online lending firm which uses non-conventional criteria to measure individual’s creditworthiness. With this, borrowers can easily take loan starting at $1,000 to $50,000, with a low 8.85% interest rate.
How’s Future of Fintech?
The overall financial world has already entered to a verge of expansion and growth. Banks and other financial institutions are also undergoing huge changes to balance with this transformation.
Moreover, these are all the collective, powerful disruptions that fintech hasbrought. Starting from how we pay and budget up to how we invest for our future, changes will continue to occur. Fintech innovations and transformation are causing considerable changes that will continuously advance how we see and use money forever.
Along with the changing of the guards with Millennia’s growing in further financial efficiency, brick-and-mortar banks could possibly be just a thing from the past. And who knows? Crypto currencies might just be that eventual force to erase cash from our lives.