Fintech has significantly altered how the finance industry works. Established fintech institutions along with start-ups are in the limelight of the industry. This is faced as a challenge by the traditional financial institutions as people used to depend on them for money transfers and transactions. However, with the development of fintech, people can go online and carry out their financial activities like making payments, money transfers, etc., from their mobile or computers. Fintech innovations have enabled people to have better control over their financial lives which results in the increase of financial literacy and empowerment.
The first use of technology in the financial industry was made in the 1950s with the introduction of credit cards. It was later followed by the introduction of electronic trading floors, ATMs, personal finance or trading apps. Thus, the fintech industry has existed for a long time but it has only recently developed so rapidly.
Fintech, as the name suggests, is a combination of ‘finance’ and ‘technology’. It is used to describe companies that primarily use technology to provide financial services to their customers. It affects how their customers pay, borrow, invest, save, move, and protect their money. It consists of specialized software and algorithms that are used on computers and mobile devices. There are various types of fintech companies; start-ups, growth companies, banks, nonbank financial institutions, and even cross-sector firms.
Fintech emerged in the 2000s and the term was applied to the technology applied at the backend systems of prominent financial institutions of that time, like banks. The shift to customer-oriented services happened between 2018 to 2022. Fintech expanded towards various industries and sectors like retail banking, education, fundraising, investment, and more. Moreover, the use and development of cryptocurrencies also took place under fintech.
In recent years, app development has become a necessity in the fintech industry as it is more convenient for consumers to access their finances just from their mobile phones. Therefore, there has been a rise in demand for expert mobile app developers. Some examples of fintech mobile apps are Paytm, Gpay, and net banking along with cryptocurrency, stock, and trading apps like Angle One, Fyers, Paytm Money, and more.
Fintech has caused a disruption in the traditional finance industry. Financial products and services like traditional banking, trading, and financial advice that were once ruling the finance industry are now facing challenges from advanced fintech technologies and innovations. A factor that increased the popularity of fintech is the use of mobile and the spread of internet services across the globe. This digital shift influenced numerous traditional finance institutions to adopt similar products and services.
Payments and money transfers play one of the most prominent roles in the fintech industry. The development of fintech allows institutions to provide these facilities to the underserved mass of people who have limited or even no access to banking services. Thus, in money transfers and payments, fintech innovations enhance the user experience by simplifying payment processes and providing convenient and efficient solutions to people. These solutions improve financial inclusion and accessibility, in turn, increasing the user base. Additionally, fintech companies prioritize implementing the latest security measures which increase trust and reliability for their customers. Some of the examples of these security measures are data encryption, biometric authentication, fraud detection, etc.
Moreover, digital payments have lower transaction fees as compared to traditional banking. This efficiency in cost not only benefits the consumers but also the fintech institutions. For consumers, financial barriers in money transactions are eliminated, meanwhile for institutions, adopting fintech payment solutions becomes more feasible. All these factors led to the expansion of the fintech market.
Over time, new technologies and developments have led to changes in the fintech industry. However, some key technologies are expected to continue driving the industry. Therefore, listed below are some of the crucial advancements that are shaping fintech.
Artificial intelligence (AI) and machine learning (ML) are crucial elements of the fintech industry. AI enables machines with human intelligence to perform tasks that need human reasoning. ML is a part of AI that learns from studying the algorithms and data to allow AI to replicate human behavior. They simplify tasks by automating the management of client data, recommending management strategies, and performing quality checks. They also monitor transactions and search for unusual behavior that can be a potential threat leading to prevention of fraud and detection of human errors.
Here are some of the key features of AI/ML in fintech:
Blockchain is used in the fintech industry to make data secure and immutable. It is a distributed database shared amongst the nodes of a computer network. Data shared through blockchain technology is fixed and cannot be altered which maintains its authenticity. Therefore, blockchain maintains a secure and decentralized record of transactions in cryptocurrency systems. Besides cryptocurrency uses, this advanced technology is used for tracking orders, payments, accounts, and other transactions.
Here are some of the key features of Blockchain in Fintech:
Cybercrime is actively taking place in the fintech industry, ultimately increasing the amount of finances lost because of it. Therefore, a data breach can cost fintech companies a lot. Due to the increase of vulnerabilities in the industry, advanced cybersecurity technologies are regulated from time to time. Fintech app development companies offer cybersecurity services like compliance assessment & consulting, vulnerability management, cloud migration, disaster recovery plans, cybersecurity strategies, and more.
Here are some of the key features of cybersecurity:
Regulatory technology (RegTech) is a system that helps financial institutions to maintain their regulatory compliance. It can be hectic for financial institutions to comply with multiple laws and regulations that they need to implement. Hence, regtech solutions help in simplifying these tasks.
Regtech comes in various forms and institutions can implement it according to their size and needs. The best solutions combine automated and cloud-based technologies along with experienced regulatory specialists.
Here are some of the key features of RegTech:
The fintech industry is one of the sectors that is likely to bloom in the future. Dealing with both technology and finance is bound to bring continuous changes that will change the way the world manages its finances. Its continued growth will most probably lead to a more inclusive and efficient financial system with the constant supervision of responsible governance and regulatory compliance.
