Have you heard of Fintech? It is an industry that is developing by leaps and bounds and that is becoming a revolution in the financial system itself.
But what does Fintech encompass? How does it work? What services does it have? If this concept is not clear to you and you want to know everything about it, then we will help you clarify your ideas.
What is Fintech?
Fintech is actually a combined word, it comes from two words in English, Finance and Technology, hence FinTech. It refers to financial technology companies that use their way of working and their ideas to reformulate the financial system thanks to new technologies.
In other words, we are talking about a company that, to offer its financial services in the best possible way for its clients, makes use of new technologies. In this way, they are not left with only one limitation, but offer different financial services at the same time that they operate in several markets.
Now, if this concept began operating for the financial industry, the truth is that it has been diversifying and now it not only offers its services to these companies, but also to small, medium and large companies in other industries. And how can you help them? Well, for example, in managing your own finances.
The first time that this concept began to know you was in 2008, when the financial crisis caused the balance sheets of SMEs to suffer a great dependence on bank loans, which made the situation untenable for many. In 2013, and having learned the lesson of the crisis, the financial industry began to transform and, a few years later, in 2019, it was consolidated in the market with financial services that combined new technologies to work and offer services to clients.
What functions does Fintech have
Now that you understand what the term Fintech refers to, what is it, we want make it clear to you what functions it offers to its customers; that is, the services in which it is trained.
- Streamline online banking, payment and transaction processes.
- Improve the security of the databases of companies and businesses as well as deal with cybersecurity.
- Manage financial processes online
- Develop financial services related to technology, such as big data, blockchain, etc.
- Manage cryptocurrencies and other digital assets.
In which sectors does it work?
For all that we have told you before, it is possible that you can cite some sectors in which these types of companies operate. But, to make it clearer, those in which Fintech already works are:
- Crowfunding. In the sense that the "donations" that are given can be made online, they do not have to be physically.
- Blockchain.
- Big data.
- Mobile banking.
- Currency market.
- Trading.
- P2P loans and insurance.
- ...
Naming companies that are related to fintech, we can quote you:
- Etoro. It is a social investment network, which is giving a lot to talk about, and which offers users trading services and access to global markets with which to meet other investors.
- CommonBond. Related to P2P loans to students.
- Indexa Capital. It is a manager that serves as investment automation.
- Mooverang. Deals with personal finances.
- Bitnoyo. It is well known to those who buy and manage their bitcoin finances.
How Fintech works
Really understanding how fintech works is very simple. And the company is governed by that principle: simplicity. Is about offer clients digital financial products and services that are simple to use, practical and can even be intuitive. Among them are the processes of banking, accounting, economics or business administration, or personal finance, in such a way that they can satisfy the needs of clients, not only in security, but also in transparency and agility.
In this case, all fintech companies are going to specialize in a specific niche. That is, there will be some dedicated to banking, others to loans, others to investments ...
In addition, they have two main characteristics: the technology and the customer. They work by offering their services digitally, but always focused on the customer, and on the user experience, that is, creating tools for them that are very easy to use and understand, where they can have everything they need at hand and not difficult to locate.
Advantages and disadvantages
Like everything, fintech has its good things and its not so good things. In the case of the advantages, there is no doubt that one of the best, both for the Government and for the clients, is the possibility of having a trace of the movements that are made, in such a way that it can be discovered to what extent it has a transaction arrived or where it came from, giving transparency and security.
Another advantage is the possibility that, from a mobile, users have access to financial services that they need at that moment, or that they want to know.
The reduction in transaction costs is certainly a significant advantage. This is not to say that there is no cost, as some services do, but it is often very low.
On the other hand, the disadvantages are also there and have been one of the problems that still drag. One of the main ones is lack of regulation in some countries. Keep in mind that in Spain it is governed by Law 5/2015 on the Promotion of Business Financing. However, there are other countries, especially Latin American, that still do not have a regulation.
The strong competition, since it is a booming business and more and more fintech companies are entering the market, means that there is a great supply for a demand that, although it is growing, is not enough for all companies.
El We still do not know the future of fintech, But if we take into account that technology is becoming more and more important in our daily lives, it is normal to think that it will have an increasing relevance.
Do you have any doubts about this concept? Ask us and we will try to clarify them.