In the financial services industry, technological innovation has upended the way that people bank and manage their money. No longer do customers need to visit physical bank branches or log into a website to check their account balance or make an online payment. Instead, digital-first fintech companies have made it possible for users to manage their money from a smartphone app, get a loan in minutes through an online application, and even invest small amounts of money in company stocks with ease. The fintech industry has spurred these changes by introducing new methods of tracking data, streamlining transactions, and automating processes. These innovations have also created opportunities for new fintech startups to enter the industry with fresh ideas about how financial services can be provided more efficiently and cost-effectively.
What is Fintech?
Fintech is a combination of finance and technology. It’s an industry that uses technology to disrupt financial services. Some of the most common services within the fintech sector include peer-to-peer lending, robo-advisors, cryptocurrency exchanges, payment processing, and financial advice. Fintech is also referred to as “financial technology”, “digital finance”, “online finance”, or “electronic finance”. The financial services industry is worth $15 trillion globally and is expected to grow to $25 trillion by 2030. As such, it’s no surprise that investors have poured $50 billion into fintech startups since 2011, and that the fintech sector has grown exponentially in recent years.
Banking Innovations and Consumer Expectations
Banks have long been the primary source of financial services, but the rise of fintech startups has changed the industry’s competitive landscape. Due to technology improvements like the internet and smartphones, people are now able to bank 24/7 from the convenience of their homes or on the go with their mobile devices. This has made it possible for people to stay on top of their finances at any time, which in turn has increased customer expectations of banks. As a result, traditional banks have had to adapt to keep up with the changing expectations of their customers. Many big-name banks such as Goldman Sachs, Bank of America, and JPMorgan Chase have responded to the rise of fintech by acquiring their own technology companies. This has enabled them to stay competitive and provide their customers with the same technological innovations that fintech startups offer, such as online banking, mobile banking, and more.
Blockchain Technology in Fintech
The blockchain is a decentralized ledger that records all transactions between two parties. This technology was initially developed for the cryptocurrency market, but it has since made its way into the fintech industry. Here, blockchain technology enables financial services providers to offer users new investment opportunities, as well as enable them to make and receive payments more easily and safely. In the financial services industry, blockchain technology is primarily used to facilitate international payments and cross-border transactions. It also makes it possible for people to invest in companies across the globe and transfer money across borders more easily, quickly, and cheaply.
Robo-Advisors and Automated Investment Advice
The traditional investment advice process has typically required investors to sit down with an adviser, fully disclose their financial situation, and discuss their goals before receiving advice on where to invest their money. However, robo-advisors have made it possible for users to receive automated investment advice that is based on their current financial situation and risk appetite. This has made investing more accessible to small-scale investors and individuals who don’t have the time or the desire to sit down with a human adviser. Robo-advisors use algorithms and artificial intelligence to provide investment advice based on a user’s risk appetite, savings, and current financial situation. While these services are not able to provide as in-depth investment advice as human advisers, they are suitable for small-scale investors who want to invest their money wisely but don’t have the time or desire to meet with an adviser.
FinTech Startups in the B2B Space
The fintech industry has made it possible for small-scale businesses to receive financial services on par with those offered by large, traditional financial institutions. This has been made possible by fintech startups that provide online lending, online payment processing, and more. Robo-advisors, robo-trading, and online payments have all made it possible for users to receive financial services on par with those offered by banks. Additionally, fintech startups have made it possible for small-scale businesses to receive the same level of financial services.
The Bottom Line
Now more than ever, it is important for financial institutions to embrace innovation and stay open to technological change. This will enable them to keep up with the competition and deliver the high-quality customer service that their customers expect.