The term fintech might conjure futuristic ideas of the merging of traditional finances with technology. But fintech already likely holds a prominent place in your daily life.
If you value the convenience of quick money transfers among friends and family, then you are already enjoying one aspect of fintech. An easy example of fintech includes any mobile payments you’ve made via Venmo, Apple Pay, Zelle or similar payment platforms.
But the term fintech applies to all kinds of products and services.
“The scope of fintech is massive now – thanks to technology, ” says Bill Clerico, co-founder and CEO of WePay, a Chase-owned company. “The rise of fintechs in the last decade has caught the attention of traditional financial institutions as an opportunity to enhance more personalized and robust services at a faster pace and to improve the overall customer experience.”
What else does the fintech umbrella include? Let’s find out.
What is fintech?
The name ‘fintech’ itself combines the two key components: finance and technology. The term became a word in 2018 but has been used by bankers and technologies for years.
The big idea behind fintech is to use technology to make traditional financial sectors safer, faster and more efficient. Fintech can be used to describe all sorts of companies, products and services.
“Fintech refers to any business that uses technology to enhance or automate financial services, transactions and processes,” says Matthew Dailly, the managing director at Tiger Financial. “It can be used in a wide range of applications and is probably most notable in mobile banking, but is equally as important and as much used in industries such as cryptocurrency and insurance.”
With the help of fintech, the way that we interact with money and conduct financial business is changing every day.
Where is fintech used in 2020?
Let’s take a closer look at how fintech is being used in 2020.
Mobile payments represent one of the most tangible developments from fintech. It is fairly likely that you’ve used mobile payment options like Venmo or Zelle to expedite your payment experience and they’re becoming even more popular in the pandemic.
“Fintechs are able to offer consumers more seamless payment options; allowing them to pay wherever and however they want,” WePay’s Clerico says. “Touchfree, contactless payments are more in demand than ever due to the global pandemic, creating an opportunity for fintechs. There is an even greater need in the point-of-sale space to have contactless payment options and digital wallets.”
“Fintech has been the ‘Great Simplifier’ in helping the average consumer gain greater access to funding, streamlining the loan approval process, and even giving consumers leverage through competing bids for their business,” says Brian Madocks, CEO of eOriginal.
Essentially, this allows for customers to enjoy a smoother experience: You’ll be able to apply for a new loan and find out if you are approved quickly and move on with your life.
With a drive toward a better customer experience, you can expect features that streamline the loan application process even more in the future, including contactless closings on mortgages.
With a changing insurance landscape (think Lemonade), fintech is making lasting changes to the way insurance companies interact with the consumer.
If you’ve sought out an insurance quote recently, you’ll notice that the process has become more efficient than yesteryears. Instead of being required to work with an insurance agent in-person, you can potentially get a quote within minutes. Plus, you’ll likely be able to finish the process completely online.
Many of these changes are due to the innovative technology that fintech brings to the table, such as supercharged data analytics, machine learning, and distributed ledger technology to better track and predict the needs of customers.
A checking account is one financial product that most consumers need to manage their money. In the past, traditional financial institutions have been the only option. But fintechs are transforming traditional bank products. If you don’t want to work with a traditional bank that has a fee-laden account, then you have alternative options. Current or Chime are two examples of fintech companies that partner with banks to offer digital-only checking accounts.
These accounts use technology to help you monitor your bills and alert you when you are in danger of an overdraft. Plus, these digital accounts can learn from your spending habits and provide suggestions to improve your financial situation.
If you are new to budgeting, it can get confusing quickly. That’s when a fintech-powered budgeting app can come in handy. You’ll be able to set your financial goals essentially on autopilot with the help of these kind apps from fintech firms like Digit and Qapital.
“Fintech is also helping people develop better financial habits, make smarter choices, and automate their savings, investments and bills,” says Miron Lulic, founder of SuperMoney. “This is making younger generations far more financially-savvy than their parents.”
The tools and information to create a solid financial foundation are becoming widely available with the help of fintech.
Cryptocurrency, or a kind of digital currency that is intended to act as a medium of exchange, is a direct result of fintech innovation. A major appeal of cryptocurrency is that it has the potential to hold value without the interference of a central bank or government.
You’ve likely heard of at least one type of cryptocurrency: Bitcoin. But it is not the only digital currency available. Some of the others include Ethereum, Litecoin and Ripple.
Although the idea of digital currency is somewhat new, more people are getting on board.
Jon Squires, CEO of Currency.com, says cryptocurrency started to seem more like a real way to store value when people began to realize that you could buy part of a large property project or get involved in an exchange-traded fund through a crypto coin or token.
“The accessory services, from tax to wallet handling to security, have started to evolve very quickly as part of general demand,” Squires says. “And that’s how crypto really became a reality, with the development of fintech and a greater acceptance by the mainstream institutions, as we start to imagine how tomorrow’s finance world is going to look.”
The continued development of fintech is something that is not slowing down anytime soon. The big goal will remain the same: Reimagine traditional banking services and products with the customer in mind.