Fintech is the most popular term in the 4.0 era. It appears in almost every perspective of life: in common conversation, newspapers and it has even become a trend in businesses. But what is it?
Fintech stands for Finance and Technology. To explain in a simple way, Fintech refers to leveraging technological innovation in financial services and operations. Fintech does not originate from existing monetary systems, but it marks the encroachment of IT into those.
This article will bring you a more multi-dimensional view of Fintech and how businesses benefit in the future of Fintech.
What will the future look like?
In recent years, Fintech is present in many financial products. From end-user products (such as e-wallets, cryptocurrencies, fundraising tools, …) to products that support operation activities (smart technology services, blockchain, and more). What about in the future? How will Fintech change and what impact will it have on the entire financial industry?
There are many analyses and forecasts that have been made. However, in general, experts agree with the following statements about Fintech trends:
1. The future of Fintech will be the future of the financial sector
There are many confirmed reasons to assert that the development of Fintech is the development of the financial industry. In other words, the future of the financial sector is Fintech, especially when considering the factors of financial performance, such as cost, quality of service, information security, risk management and safety.
Fintech is and will continue to help reduce the cost of financial services, new technologies continuously eliminate intermediaries and help financial services reach the most efficient level. At the same time, the quality of service has also increased markedly, because the accuracy and agility of intelligent software are really superior to that of humans. The risk assessment process in banks and financial institutions is complex and many stages can be replaced by Fintech’s fast and accurate data analysis chain. Moreover, Fintech has shown significant upgrades in the stages of data control, ensuring security, safety, and security for customers and financial institutions.
Fintech creates critical changes to financial activities. In the future, it is almost certain that financial institutions that do not use Fintech will be left behind. To what extent Fintech reaches out, the development path of the financial market will also follow.
2. Fintech products are increasingly diverse and more innovative than ever
As in many other fields, technology has brought huge changes in the financial industry. Though many people may consider “Fintech” a new term, its countless imprints and obvious impacts on the financial world cannot be ignored.
Fintech products and services are available in all categories, from personal finance, digital banking, payments, blockchain, insurance fintech and other financial services. I’m sure you have heard about virtual money, crowdfunding and big data at least once!
But that’s just the beginning. Fintech is being invested in more than ever, and many experts expect that a series of super-utility and super-diverse Fintech products will be launched in the near future.
No one can predict how far digital technology will go, but not many people will be surprised if Fintech can bring superior financial products and completely change the face and the way that the financial industry works.
3. Fintech investments continue to increase
Because of the obvious benefits of Fintech to the financial industry, we can even say that Fintech has become an indispensable condition for a breakthrough in the financial market, investment funds, financial institutions and software as a service (SaaS) sector. Startups cannot ignore this potential factor!
Although most Fintech startups are still struggling with sales, market share and many other difficulties, new Fintech startups are born every year. And the budgets of investment funds, financial institutions, and even companies outside the industry pouring into Fintech are increasing steadily each year.
This trend will continue for at least the next five years. Especially when the financial market is welcoming more and more young customers every day. They are the generation that grew up with digital devices and technology, so the utilities that Fintech brings are a must to conquer these customers. Fintech’s budget, as well as Fintech’s potential, clearly cannot be neglected!
4. Fintech grows evenly in Asian, European, American, and Australian markets
If most of the other trendy technology products and services usually originate and blast first in the US, Fintech is a bit different. Though Fintech companies and Fintech products are growing most in the US, specifically in the financial centers of Wall Street and Silicon Valley, China is the leading market in the use of Fintech service. Over 60% of Chinese people have access to Fintech, while the rate in the US is over 30%. The reason for this is simple: Fintech services are associated with mobile phones, an indispensable device for young people today. At the same time, young people also tend to be more open to new technology, including finance.
In the early stages, most countries with developed technology and a majority of the young population use Fintech the most, such as China, India, UK, Brazil, Australia… This trend will continue in the future and will soon be balanced in Asia, Europe, America, and Australia.
5. The corporation between Fintech companies and financial institutions will strengthen both sides
Though they have the advantages of technology, innovative ideas, flexible organization, and infrastructure, Fintech companies often lack the ability to replicate the customer base and lack brand reputation to develop on the target market quickly.
In contrast, financial institutions have extensive customer data, long-standing brands, sufficient finance, and operational experience. But with a lack of technology, they require too much time and resources.
The trend of cooperating between these two entities has occurred in the last few years and is expected to remain the dominant model in the coming decades. It is unpredictable whether this cooperation will be “peaceful” forever or if the financial business sharks will swallow Fintech companies or vice versa. Yet, in the short term, this partnership is still promising. It will bring strength to both sides, and help to push both Fintech and the financial system to new heights.
Why businesses should use Fintech
1. How Fintech changes customer’s behavioral psychology
The popularity of the smartphone has made a huge change in consumer behavior. We are living in an “always-on” culture, which is cultivated by the rapid growth of mobile services and apps. People now can access more information or data anytime, which was impossible before.
More than checking accounts or setting up an online investment, users now want to easily handle financial activities in the same way they check email or surf Facebook. This is a huge opportunity for businesses. Sooner or later, no one will succeed and grow without using the right fintech services.
2. How businesses benefit from the future of Fintech
The rise of Fintech has permanently changed the way companies do business. The traditional direct connection model with a local bank or a traditional investor is no longer the only way.
From crowdsourcing to mobile payments, business owners now have unlimited options. The cost to start a company or expand it has never been lower than it is today!
Fintech companies also cover a wide range of sub-sectors: crowdfunding, peer-to-peer lending, algorithmic asset management, credit scoring, education lending, working capital management, cyber security, quantum computing, and so on. Despite operating in such vast fields, these companies all have one thing in common: they build and deploy technology to make financial markets and their systems work more efficiently and more fruitfully.
Fintech plays an essential role in the SaaS Sector as well. Let’s see some examples of the benefits of software as a service. Cross-border remittance was a deadly trap for business owners, now being reorganized through innovators. TransferWise has completely changed the traditional (and expensive) banking solution when sending money across nations. This helps SME companies and individuals transfer money at a much lower cost than before.
Another SaaS example is Shoeboxed. This is an expense & receipt tracking tool that assists businesses in getting reimbursed fast, maximizing tax deductions, saving time and effort when it comes to accounting.
The future of Fintech opens up countless opportunities. Businesses can now offer more services than ever before and for a small fraction of what they previously offered.
As we are into the final quarter of 2021, it is time for businesses to pay close attention to the development of Fintech as well as its huge impact on our lives. Understanding the latest opportunities and developments in the field will improve your business situation and help you stay on top of the market.
What is your prediction about the future of Fintech? Leave a comment to share your thoughts with us!
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