So you’ve heard of fintech, and probably have used a service related to it. But what’s it actually about and why has it become such a trending industry?
More and more players are joining in, and billions of dollars are being poured into it. In 2018 alone, records were broken, one of which was how the money raised in the first half of the year surpassed the previous year’s total.
By definition, fintech itself is anything that’s related to finance and technology. Yes, the word itself is a portmanteau of “financial technology” – so basically anything that offers financial services by utilizing technology can be classified as this. IoT devices like wearables, for example (IoT of which we’ll discuss later on) can make financial transactions extremely easy.
Usually, fintech companies are disrupting their traditional finance provider counterparts, because they focus on making sure that terms are easier for their customers. If you’ve ever heard of Stripe, Xapo, Adyen, or Transferwise, these are examples of fintech companies.
And like anything trending, the growth in the industry has been big – if not enormous. During the last several years, the amount of investments has multiplied.
In 2013, there was reportedly over $3 billion invested in fintech, and this figure quadrupled in a year: by 2014, there was over $12 billion of investments.
What makes this even crazier would probably be the fact that it’s a global phenomenon. Since fintech relies heavily on technology, there’s no escaping its growth.
Although Asian countries like Singapore have long been well developed, others that were initially reluctant to the new technology have also started opening up more doors of opportunities. Among these countries would be Indonesia, who’s been welcoming fintech and taking it seriously.
By smartly combining solutions provided by the Internet of Things (IoT), fintech can reap more benefits. Thus, its growth will only be accelerated.
A fintech company can utilise a beacon for their staff. As an example, this beacon (or other smart device) can help staff send messages to customers. This way, service is being made contextual and personalized.
By utilising technologies like NFC that’s connected through a network of IoT, customers can pay for the stuff they want easily and practically. This saves a lot of time and hassle for them.
The potential is limitless, but as an example, a fintech car insurance company can provide an algorithm to track vehicle performances.
The results of the calculations are then compiled under an IoT network. This data can be analyzed to personalize their customers’ needs based on their vehicles’ conditions.
Opportunities don’t seem to cease to exist either.
Companies like Ripple and Coinbase are serious in this area. A blockchain/distributed ledger fintech company offers unique services related to improving transactional needs. Ripple built their own blockchain and offers faster transactions for banks to use.
There are many fintech companies that help people borrow money or pay for the things that they like with installments. Affirm is one of them. Led by PayPal’s very own co-founder, Max Levchin, Affirm helps retail customers buy the things that they like.
Ok, so that’s good that people get easier access and terms to financial services. But since everything in this field relies on tech and its development, shall we be afraid that people will lose their jobs? For example, would Zest need credit analysts now that they have their own AI-based platform?
This subject has long been a debate as to whether the emergence and existence of fintech would be more beneficial than harmful.
One can argue what they like, but it seems like it may actually bring more jobs than it cuts. In fact, from 2016-2017 alone, at least 7,800 jobs were added to the fintech and financial services sector – and this is just in Singapore.
If anything, it won’t be the extinction of workers. Rather, it could bring positives as workers would have to “upgrade their skills and knowledge” to ensure that they can still compete. It could be like when weaving machines came on the scene. Of course, there’s always the possibility that technologyin general will start to irrevocably replace jobs, but hopefully, humans will always have a way to turn tech into more jobs… otherwise, we might all have to start living off the land again.
Since fintech was built to answer real needs (e.g. people that are less fortunate could not buy things as easily as the ones with lots of money) fintech should only grow stronger. This is proven true especially in:
Who doesn’t know Alibaba with their AliPay these days? As the world’s most populated country, the potential is there.
There were reportedly 500 million Internet finance service users in 2016, and just recently, online transactions saw a new record as Alibaba scored over $30.8 billion in just 24 hours. China is very welcoming to fintech. In fact, nearly 90% of the Internet finance market there is ruled by Fintech.
The fintech industry has also made it big in this Nordic country. Traditional big boys like banks are even at risk of losing tens of billions of dollars due to the disruption from this country’s big fintech players, like Stabelo and Hypoteket.
Sweden also holds quite a figure in operating revenues, with no less than $1.31 billion pocketed in 2016.
While this seems to be a global trend, it cannot be denied that fintech hasn’t successfully reached every part of the world.
It’s not even a question, especially if you’re in a country (like India for example) that’s among the slowest in Internet speed. As FinTech relies heavily on tech infrastructure, including Internet, countries like this really have to catch up.
All in all, though, it looks like FinTech is set to continue its development. Judging by the fact that it started off strong in 2018 (except cryptocurrencies), it could still continue to boom.
As to what exactly will happen and whether the majority of FinTech companies will still be there for decades to come, you and I can only guess.
Furthermore, with the way IoT is developing, FinTech looks like it still has room to improve. IoT works by complementing features that can arguably be considered to be lacking in FinTech. IoT improves these processes, making things more efficient and effective.
I think it was just a matter of time, before the Fintech industry would boom with the huge potential for smarter, easier and cheaper solutions. Fx. Transferwise making it cheaper to make cross-country payments. In Sweden fintech solutions are already very popular.
Its kind of like the same with Legaltech. These industries that are not too modern and digital already, this is where the potential are biggest. And where the digital solutions probably will boom the most.
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