What is Fintech?
Fintech (financial technology) is a form of technology that provides ease of financial services to consumers and businesses. Born in the 21st century when the internet has grown, it is being widely used by people in different sectors like education, investment management, and banking. It makes it easier for consumers to connect with financial services with your smartphone or computer. It is very interesting to see how the future of the Fintech and the Fintech Industry will shape the financial markets and services.
With the growing need for consumers to have safer and more secure ways of accessing finances, many banks have adopted fintech technology which is much faster as compared to traditional banking services.
Uses of Fintech
· Mobile payments
· Insurance
· Cryptocurrency
· Stock-trading apps
· Budgeting apps
· Crowdfunding Platforms
Future of Fintech Industries
Fintech and Regulators
Fintech industries have had struggles with their association with regulators, fintech failed to understand their relationship with anti-money laundering in the banking sector. In the future, the fintech industries should get ready to follow the AML regulations.
With the current argument that fintech is under-regulated, the office of the comptroller of the currency submitted a request to fintech industries to start being regulated like banks and will be allowed to offer all baking services to consumers. With that, banks should be ready for competition with fintech.
Fintech Compliance Standards
With the growing cases of fraud and cyber threats, fintech needs to be more vigilant and ready to handle large bank documents to meet compliance standards. And on a partnership with lenders, there’s a need to be conversant with the lenders’ compliance laws and their consumer protection laws to minimize fraudulent activities.
New Consumer Market
Fintech is helping consumers to get access to services they were not privileged to have before. With just your smartphone, accessing financial services is much simpler and will keep growing as it is fast and convenient. Some countries, though, are slower to adopt new technologies, like western countries.
In China, for example, the payments made through the phone are much greater than the cash payments. Last year, a whopping $5.5 trillion was transacted through apps. In the sub-Saharan, Philippines, and Indonesia, there has been under banking for quite a long time, but with the current change in the communications network and mobile payments, growth is expected. Another reason for under banking in these countries could be the lack of smartphones among consumers but with the demand, they are having, smartphone sales are expected to go up.
Better financial services
Fintech’s main aim is to create a wide range of services from lending, managing assets, etc. This will allow more investors to want to continually use fintech.
Innovation
Due to the advancement in technology, fintech is driven by blockchain and cloud computing among others. Also, with the technology, future trends of companies can be formulated and easily adjust to them. More innovations are expected in the future.
Fintech Disruption in Banking Future
Many banks now have ventured into technology in their systems. Tiresome work has been replaced with machinery which saves time and is quite easy to use. In financial technology, all that is needed is entering your email address and creating an account. This is unlike the old days where you had to stand in long lines just to set up an account in a bank.
Most banks now have invested in biometric authentication to ensure a much safer technological environment. Fintech also has very attractive rates that attract customers which have prompted partnerships to improve banking services.
Future of Fintech in Capital Markets
Innovation
Capital markets are widely known for innovations. Fintech’s future is based on developments between clients and institutions. This technology makes banks change the way they operate because they don’t want to be completely overtaken by fintech.
Openness
Fintech is open. The banks on the other hand often look for more innovative technological methods which then leads to newly acquired skills that lead to growth.
Fintech also does help in boosting the banking sector. In the future, all manual work will be replaced by technology and a lot will be learned with other sectors too. This cooperation will ensure better customer service.
Starting with proven technologies not emerging ones
Areas like the RPA, AI have potential in the game. This will help build opportunities in the capital market before getting into other technologies.
Rebuilding Trust
Banks have suffered different regulatory actions that have made people lose trust in the banking sector. To regain the trust lost, the banks will need to come up with new steps to reduce risks soon. Accountability is one of the key steps to be taken to limit risks.
Top 10 Fintech Companies in 2020
There has been growth in financial technology and fintech industries are growing worldwide.
1. ANT FINANCIAL
Having originated from Alipay, it was founded in October 2014 and it is run in China. They offer a wide range of services like insurance, payments, private banking, and wealth management. Its business value was estimated at $150 billion as of 2018. Ant Financial is growing widely and is being used in restaurants, supermarkets, and fresh good markets.
PROS
· It can be used in many places. Major cities like Hong Kong and Tokyo.it is also expanding outside mainland China.
· Gives some extra credit for offline payments.
· provides various financial products.
· It has a powerful credit system.
· Provides integrated services like getting discounts in restaurants and accessing government services.
2. ADYEN
This platform was founded in 2006 in the Netherlands and it provides payments acceptance for up to 4000 businesses worldwide and its revenue as of 2019 was $496.9 million as per Euro net exchange.
PROS
· Easy to use
· It is fast
· Supports huge payments
CONS
· poor fraud control tools
3. QUDIAN
This is a payment platform for micro-lending and helps in managing investments. It was founded on March 1st, 2014 in Beijing, China. Its main focus sectors are electronics, retail, and lending. It has over 60 million customers and is valued at 47.8billion.
PROS
· Offers expanded research
· Good customer service
CONS
· High-interest rates
4. XERO
Xero is a cloud-based accounting software that helps small and medium-sized businesses. It was founded in 2006 and it is New Zealand based. It was 2014 and 2015’s Forbes most innovative growth companies.
PROS
· easy to use
· deals with foreign currencies
· uses cloud accounting
· has great customer service
CONS
· Few invoice formatting capabilities
· Few states payroll availability
5. AVANT
It is a private company born in 2012 in Chicago that offers personal loans with terms of up to 5 years. It has grown rapidly since and has even extended its operations to Canada and the UK. Investors contributed a whopping $1.4 billion and $1 billion loan through its website.
The process of applying for a loan is easy and can be submitted online and Avant gives feedback right away. Loans are offered as per your credit score. Avant loan helps in any situation that might come up in your life. The loan window is up to 5 years depending on the amount of money lent out.
PROS
· Uses machine learning algorithms
· Great customer review
· Flexible repayment period
CONS
· High rates of interest
6. OSCAR
This is a health insurance company based in the US that was founded in 2012 to bring a change to how the healthcare system in the US worked. By 2019, Oscar was valued at $3.2 billion and with over 16,000 subscribers.
PROS
· No referrals needed
· There is the availability of a doctor 24/7.
CONS
· The dental department is not insured.
· Serves a few states.
7.ZHONGAN
This is a Chinese international insurance company that offers consumers a wide range of services like risk control services. It also offers an online market through the internet and has over 460 million subscribers and has had issued more than $5.8 billion insurance services in health, travel, and consumer finances.
Founded in 2013, it has 450 million users and registered more than 5.8 billion policies and it connects its users through blockchain technology. It boasts of being the first Chinese company to have an internet insurance license.
PROS
· Promising growth rate
8. KLARNA
Klarna was founded in 2005 in Sweden and makes online shopping easier and safer. It has grown rapidly and extended its operations in other countries and has so far made $35 billion sales. It has a total of 85 million users in the countries where it operates.
PROS
· Fast
· There is no minimum credit score.
CONS
· Can be costly if the loan is not repaid quickly
· Small loans
9. LUFAX
This platform was established in 2011 and is owned by the PingAn group. Its main aim is to provide wealth management in risk management and other financial services. It’s a peer to peer lending business service and it is venturing into safer wealth management methods.
PROS
· Advanced risk control systems.
· Has strong branding
CONS
· Discouraging track record
· Slow technological growth.
10. SOFI
Sofi is an online American platform that provides student loans, mortgages, personal loans, etc. It was founded in 2011 by four students who hoped to provide better options to students who had accumulated debts for their education.
Sofi is the most funded fintech company with a $2.4 billion funding. This technology targets students who are not so rich reach their dreams.
PROS
· Offering protection to the unemployed
· Fixed rates
· Flexible payments
CONS
· No direct payment to the creditors
SOURCES USED IN RESEARCH FOR WRITING
- https://caia.org/aiar/access/article-1021
- https://www.benzinga.com/money/oscar-health-insurance-review/
- https://www.financialsamurai.com/the-most-funded-fintech-company-sofi/
- https://www.getapp.com/website-ecommerce-software/a/adyen/reviews/
- https://www.investopedia.com/tech/worlds-top-10-fintech-companies-baba/
- https://www.investopedia.com/terms/f/fintech.asp
- https://blogs.worldbank.org/voices/fintech-and-capital-markets-what-next
- https://www.hlb.global/fintech-and-the-future-of-finance/
- https://www.antfin.com/index.htm?locale=en_us
- https://embapro.com/frontpage/swotcase/21277-lufax-fintech
