Technology has transformed the way we do things. Impacting every corner of our lives, it has revolutionised even the most mundane tasks, from shopping and banking through to dieting and dating.
It’s unsurprising, then, that its impact has extended to the financial services industry, which has long been at the forefront of digitization and technological revolution. The result is a natural consequence of progress: that more and more fintech start-ups are exploding onto the scene.
Using their innovative technologies to make it simpler and more straightforward for consumers to complete an array of financial tasks, from investing to making payments to taking out a loan, they have turned the industry on its head.
What is fintech?
For those who are unfamiliar with the term, it’s worth beginning this article with an explanation: fintech is an abbreviated term for financial technology. The sector covers an incredible array of companies, all of them using software to provide a new and ingenious take on traditional services.
As social trading platform eToro explains in the complete fintech guide that’s available on their website, the relationship between technology and financial companies is changing at a rapid pace. While the latest tech has always been utilized by businesses, this newest wave of innovations is affecting the way that consumers interact with their money at an everyday level.
Impacting everything from how they purchase products to the way in which they pay bills or send money, this trend is being capitalized upon by start-ups, who are rapidly encroaching on services that were once the sole remit of banks, insurance companies, and financial management groups.
Inserting themselves into this space, fintech companies are disrupting existing financial models and providing services that larger financial corporations cannot. While these more established enterprises are beginning to recognize the necessity of software solutions, they are struggling to catch up, with many forced to turn to their fledgling rivals to improve their own offerings.
The result is that this relatively new industry is quickly becoming the benefactor of global investment so that its total worth is now a multi-billion-dollar figure – a surprising feat for a sector still dominated by start-ups.
What are the advantages of fintech?
For the average consumer, the emergence of fintech onto the scene has proven hugely advantageous. Levelling the playing field, it has given the ordinary person access to services that we were once the remit of only the super-wealthy, such as investing.
This is because these innovative technologies make it easier and more economical to provide expert advice to the masses than it has ever been before. Such a lowering of prices increases the sector’s accessibility – and gives fintech companies a significant advantage over their more traditionally structured counterparts.
Lending is another area that has been positively impacted. Allowing fintech companies to look at a different and more diverse set of data than standard underwriters, it has allowed them to introduce new criteria and open up the door to those who would previously have been denied personal or business capital.
The beauty of this is that it could never have happened without this incredibly clever technology. It is not simple altruism but rather powerful computer systems, complex software, and experienced data scientists who are driving this change – to the benefit of society as a whole. As outlined by Forbes, new fintech start-ups are even aiming to tackle societal issues as well as financial, from providing female investors with tailored advice to making investment more accessible to lower-income clients.
Why is fintech so popular?
When it comes to explaining fintech’s popularity, it isn’t difficult to understand. Focusing on delivering the sorts of services that ordinary people want, this heavily start-up dominated sector is breaking apart the old way of doing things and introducing alternatives that are more accessible.
Throwing the handbook of how to do things out of the window, these start-ups are geared toward the average person on the street. Intentionally or not, they are slowly deconstructing the unconscious privilege that has pervaded the financial services industry for so long, by giving people who would normally have been excluded the chance to invest, borrow, and even buy their own homes.
What this means moving forward is important: that the financial services sector as a whole is about to change. Forcing their more established rivals to also come up with easier solutions and improved access, fintech is dominating the start-up market for a reason – because it benefits us all.