How Much Do You Understand About FinTech?
“What exactly is FinTech?”
For most people, this is such a small, simple question but it’s difficult to answer. The term FinTech is a buzzword in the digital era where we are living in and it is often tossed around in the media and in casual conversation. We think you should understand what it is and next time when people mention about this word, you won’t be full of question marks!
Q: What is FinTech?
A: Financial Technology – FinTech for short is defined as an economic industry composed of companies that use technology to make financial systems more efficient. Simply put, Fintech is a technical tool to support financial services.
Q: Who’s doing this? What does a typical FinTech company look like?
When people think of FinTech, they often focus on start-ups, breaking into areas that banks and other legacy financial institutions have dominated. But we think about all the players in a larger FinTech ecosystem, which we refer to as the As, Bs, Cs and Ds:
- As are large, well-established financial institutions such as Bank of America, Chase, Wells Fargo, and Allstate. We sometimes refer to these as “incumbents.”
- Bs are big tech companies that are active in the financial services space but not exclusively so, such as Apple, Google, Facebook, and Twitter.
- Cs are companies that provide infrastructure or technology that facilitates financial services transactions. This broad group includes companies like MasterCard, Fiserv, First Data, various financial market utilities and exchanges such as NASDAQ.
- Ds are disruptors: fast-moving companies, often start-ups, focused on a particular innovative technology or process. Companies include Stripe (mobile payments), Betterment (automated investing), Prosper (peer-to-peer lending), Moven (retail banking) and Lemonade (insurance).
Q: What evolution does FinTech bring about compared to traditional finance?
A: FinTech has created competition — real competition, not the pseudo variety between different banks all offering the same thing at the same price. No longer is it a choice between Bank A and Bank B, where there is little to no differentiation between the product or service that they offer.
It is a choice between what banks offer and what fintech companies offer. Say your company needs a loan and your bank grants you a line of credit. But you later find out that if you went with a P2P fintech business loans company, you would have received much better terms.
Now throw in other financial services your company might need such as money transfer, foreign exchange, equity funding and you may well be looking at a massive difference in costs, quality of service and time across the board.
Q: How FinTech is changing your business?
A: It used to be that if you wanted to start a business, you would go to your local bank to ask for a loan or seek out a traditional investor. If a company wanted to accept credit cards, it would need an account with a big credit provider — not to mention a land line and bulky equipment. But this is no longer the case.
FinTech like crowdfunding, mobile payments and money transfer services is revolutionising the way small businesses start up, accept payments and go global, and they are making it easier than ever to start and run a business.
Q: How FinTech is changing your customer?
A: FinTech is also changing customer behaviour and expectations at a tremendous rate. Consumers are now so used to being able to access data and information anywhere and everywhere, that it seems natural to them to want to be able to adjust their investment portfolio or deposit a cheque while waiting for the bus.
And customers expect the same level of service and access from a small firm as a large firm. They expect a seamless mobile experience whether they are banking with a global bank or a local one. They expect to be able to pay with a credit card whether they are in a department store or the corner shop. Soon, people will expect to be able to pay with their phones anywhere they go as well and in fact, it is happening now.
Q: What’s the future of FinTech?
A: Accenture recently released a report which found that investment in FinTech around the world has increased dramatically from $930 million in 2008 to more than $12 billion by early 2015. We can see the potential growth of FinTech around the world as the rise of FinTech has opened up a world of possibilities. Businesses can offer more services than ever and for a fraction of the price of what it would have cost before. We all have many facets of our lives that touch our financial services and there’s much more to come in the future.
Source: PwC Fintech