FINTECH SECTOR

COMPLETION

• Financial technology (Fintech) is used to describe new tech that seeks to improve and automate the delivery and use of financial services.

• At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes, and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones. Fintech, the word, is a combination of "financial technology".

• The most talked-about (and most funded) fintech startups share the same characteristic: they are designed to be a threat to, challenge, and eventually usurp entrenched traditional financial services providers by being more nimble, serving an underserved segment or providing faster and/or better service.

• For example, Affirm seeks to cut credit card companies out of the online shopping process by offering a way for consumers to secure immediate, short-term loans for purchases.

• While rates can be high, Affirm claims to offer a way for consumers with poor or no credit a way to both secure credits and also build their credit histories.

• Similarly, Better Mortgage seeks to streamline the home mortgage process (and obviate traditional mortgage brokers) with a digital-only offering that can reward users with a verified pre-approval letter within 24 hours or applying.

• GreenSky seeks to link home improvement borrowers with banks by helping consumers avoid entrenched lenders and save on interest by offering zero-interest promotional periods.

• Uses: As for consumers, as with most technology, the younger you are the more likely it will be that you are aware of and can accurately describe what fintech is.

• The fact is that consumer-oriented fintech is mostly targeted toward millennials given the huge size and rising earning (and inheritance) potential of that much-talked-about segment.

• Some fintech watchers believe that this focus on millennials has more to do with the size of that marketplace than the ability and interest of Gen Xers and Baby Boomers in using fintech.

• Rather, fintech tends to offer little to older consumers because it fails to address their problems.

• When it comes to businesses, before the advent and adoption of fintech, a business owner or startup would have gone to a bank to secure financing or startup capital.

• If they intended to accept credit card payments they would have to establish a relationship with a credit provider and even install infrastructure, such as a landline-connected card reader.

• Now, with mobile technology, those hurdles are a thing of the past. Regulation: When it comes to businesses, before the advent and adoption of fintech, a business owner or startup would have gone to a bank to secure financing or startup capital.

• If they intended to accept credit card payments they would have to establish a relationship with a credit provider and even install infrastructure, such as a landline-connected card reader.

• Now, with mobile technology, those hurdles are a thing of the past.

• As technology is integrated into financial services processes, regulatory problems for such companies have multiplied.

• In some instances, the problems are a function of technology.

• In others, they are a reflection of the tech industry's impatience to disrupt finance Banking: Mobile banking is a large part of the fintech industry.

• In the world of personal finance, consumers have increasingly demanded easy digital access to their bank accounts, especially on a mobile device.

• Most major banks now offer some kind of mobile banking feature, especially with the rise of neobanks.

• Neobanks are essentially banks without any physical branch locations, serving customers with checking, savings, payment services and loans on a completely mobile and digital infrastructure.

• Some examples of neobanks are Chime, Simple and Varo. Savings: Fintech has caused an explosion in the number of investing and savings apps in recent years.

• More than ever, the barriers to investing are being broken down by companies like Robinhood, Stash and Acorns.

• While these apps differ in approach, each uses a combination of savings and easy, small dollar investing to introduce consumers to the markets.

• Reasons That Make Fintech a Good Investment Avenue Fiat currency is becoming digital                            Data has become the new oil   The social impact     FinTech is the use of innovative technology to deliver a wide range of financial products and services.

• It aims to create a more convenient, flexible, and faster consumer experience and has been used effectively in many business segments including: •    insurance •    mobile Payments •    investment Management •    fund-raising There has been a rapid growth of FinTech across the world, and this has resulted in many benefits for consumers, including: 1. Faster Rate of Approval. FinTech has the potential to increase accessibility and greatly speed up the rate of approval for finance or insurance.

• In fact, in many situations, the application and approval process can be completed within 24 hours.

• 2. Greater Convenience. Many FinTech companies, such as Besure, make great use of mobile connectivity to enhance the efficiency and convenience of transactions.

• With consumers using smartphones and tablets to manage their finances, FinTech businesses can streamline their processes and provide a better customer experience.

• 3. More Personalized Service. FinTech firms not only enjoy lower operating costs, but they can more easily react to consumers’ individual needs because they have greater access to a range of information about them.

• 4. Advanced Security. Harnessing the latest mobile technologies has resulted in FinTech companies investing in major security to ensure consumer data is kept safe.

• A few of the latest security options used by such companies include biometric data and encryption. 6. Lower Costs.

• FinTech companies are able to give their consumers the advantage of lower premiums than those associated with traditional firms because they rid themselves of any brick and mortar costs such as rent, advertising, and salaries, and instead invest money in their clients.  

•   Price: A key aspect of Fintech is with each innovation comes a potential reduction in cost, not just for businesses, but for the consumer as well.

• An example is UK fintech firm Cashplus, who with their Payments API (Application Programme Interface) innovation, have been able to potentially save companies 50% on transactions costs normally associated with the banks.

• This could mean £500 million in potential cost savings overall as the product can process simultaneous payments, saving time and money.

• With algorithms becoming more and more intelligent and able to judge things like lending risk more accurately, the automation of many processes means less of a physical presence is needed.

• Many online or digital-only lenders can offer same day lending if an applicant is approved, and this is only possible due to the advancements of Fintech.

• Say you were looking for short term loans or a payday loan, for example, you would find many lenders offering a fast turnaround on their services.

• The demand from consumers to be able to get the service they need in an instant is high, with 90% of banks expecting growth in the usage of mobile applications, with an increasing focus on ‘mobile-first’ to be able to reach out to consumers, according to data from PwC.

• Many lenders have been able to deliver a quicker decision process thanks to less information needed from an applicant whilst still adhering to FCA lending guidelines.

• The automation process has been positive for many consumers, with Artificial Intelligence expected to power 95% of all customer interactions in the next decade with many preferring machine interactions over human. Security: With speed innovations come the need for tightened security protocols, and Fintech innovations have had their influence on this too. Reports suggest that UK businesses are the main loser – at a cost of around £21bn per year – when it comes to cybercrime due to the levels of intellectual property theft and espionage.

• In the financial sector, these costs reach just under £2.5 billion per year,  highlighting the need for better security.

• One emerging innovation that follows the lead from the rise of smartphones using the technology, is biometric authorisation.

• Being even more secure than a PIN, using your fingerprint to authorise payments and transactions is the next step in securing digital-only transactions in the future.

• Both Visa and Mastercard have trialled biometric bank cards in the last year and the signs are positive for future, widespread use.

• The development of Blockchain technology also, for example, is a secure way data can be stored on thousands of servers and has revolutionised the financial markets.

• Like cryptocurrency, the security and encryption involved mean trust is involved with consumers using them, especially while Fintech companies are rapidly expanding.

• It is expected by 84% of business executives that Blockchain technology will eventually have mainstream usage, with 450 million blockchain transactions having taken place up until September 2019.