What Is Fintech? A Look At The Industry, The Companies, and Its Uses
Believe it or not, you are smack in the middle of a technological revolution in the finance sector. And it comes as no surprise that this revolution was made apparent during the Covid-19 Pandemic.
This technological revolution is called Fintech, or Financial Technology. But what is Fintech, and how is this going to help you and your business in 2021? What are its pros and cons? What can we expect from this revolution five to ten years from now?
What Is Fintech?
Fintech is short for Financial Technology, a growing industry that covers all technology related to financial services. Individuals and companies providing the apps, software, or any other form of digital service about finances and its users are part of Fintech.
Within an operational definition, Fintech is any company or individual that uses the Internet, mobile device, cloud-based services and any technology that helps users like you and me to carry out financial transactions or to avail of financial services.
Fintech is used on a B2C (business to consumer) basis thanks to its ease of use and accessibility. But some Fintech products are now making headway towards a B2B-facing (business to business) approach.
Let's Look At The Numbers
According to a 2016 survey, people use between one and three apps to help manage their finances. These involved online banking applications, but Fintech has extended its reach outside of mobile banking and branched out to multiple sectors such as cryptocurrency, investments, insurance, and stock trading.
In 2017, Fintech investment rose to 18%. The total global investment in Fintech investment has reached US$97.7 billion between 2010 and 2017, with US startups accounting for 54% of all investments.
Following the Covid-19 Pandemic, investment in Fintech was still relatively substantial, with a global investment total of $44 billion. This was a 14% increase from 2019's global investment total.
Again, the USA holds the top spot for the most investments for 2020.
What do these numbers tell us?
Companies are constantly developing technologies to help their consumers carry out financial transactions.
People are willing to invest in these companies to get their products out faster to the public.
With 2 billion people (estimated) worldwide without traditional bank accounts, Fintech provides them with the only option to take part in financial services without having to go to a brick-and-mortar location of these services.
Fintech innovation is the goal of several startups and firms, and investors are supporting them.
Who Uses Fintech?
The fintech industry is not limited to budgeting apps or online banking apps. We all have those on our phones. So, who uses Fintech and for which purpose? Well, there are two categories of users of fintech services.
B2B (Business to Business)
Before the advent of Fintech, businesses resorted to going to banks to obtain financing and loans. This was a tedious process that took up weeks of a business owner's schedule. Everything was a hassle.
With new technology in the financial sector, business owners can now secure loans and financing through various Fintech platforms on their mobile phone. There are also cloud-based software and Customer Relationship Management Services (CRMS) out there that allow companies to directly interact with their consumers, and vice versa.
B2C (Business to Client)
Fintech also caters to individuals looking to avail themselves of various financial services. Cash apps like Venmo, PayPal, and SingPay are just a few of the popular choices for Fintech apps that are B2C-oriented.
Traditional banking is Online banking services only provided payment and inquiry services, but now you can carry out many activities straight from your mobile banking app. As a consumer, you can shop from any website online and pay for any product without any hassle. Websites such as Amazon work together with various payment gateways to accommodate purchases from all around the world.
Fintech Companies and Startups
Several fintech companies and startups have become popular over the last few years and for a good reason. Their products are utilized by different businesses and regular individuals like you and me because of their features and benefits.
Let’s take a look at how these companies and startups have changed the financial industry over the years.
Blockchain and Cryptocurrency
Nothing's more synonymous with Fintech than Blockchain and Cryptocurrency. Way before the Bitcoin bubble burst, cryptocurrency and blockchain fintech platforms were already around. Now, they've become easily accessible to the public due to the growing number of people investing in cryptos and using blockchain for transactions.
What Are The Key Features of Blockchain and Cryptocurrency Apps?
Much like any online banking app, blockchain apps make it easy to send money through the network. It only takes a few minutes before the transaction is completed. Transactions made within the blockchain network are also secure and encrypted, making it enticing for people and businesses who value security and anonymity.
Cryptocurrency apps and blockchain apps are peer-to-peer, meaning both buyer and seller carry out transactions. There is no intermediary involved, so there are no extra fees incurred for any transaction.
What Are The Benefits of Cryptocurrency and Blockchain?
Blockchain and cryptocurrency fintech apps secure user data through encryption. Anonymity is the name of the game here.
Transactions are carried out using unique keys that only buyers and sellers can access. This adds to the security and integrity of each transaction within the network.
Blockchain technology and cryptocurrency are popular because they're an alternative to payments and remittances.
Transactions made within the network are free from the risk of fraud.
What Are Examples of Cryptocurrency and Blockchain Fintech?
BlockVerify (www.blockverify.io) - Widely used for buying and selling cryptocurrencies such as Bitcoin. The platform is highly secure, and the risk is minimal for fraud.
Coinbase (www.coinbase.com) - This platform allows you to manage, buy, and sell your cryptocurrencies. Think of it as a digital wallet that stores cryptos.
Binance (www.binance.com/en) - Considered to be one of the most recognized and widely used Bitcoin exchange platforms in the industry.
DIGIXGLOBAL PTE LTD (www.dgx.global) - DIGIXGLOBAL is considered the gold standard for peer-to-peer digital assets. And yes, this is a local Singapore Fintech startup too. You can purchase gold on Ethereum with digital currency such as Dogecoin, Bitcoin, Ether, and Litecoin. They are also known for their Proof of Asset (POA) protocol, Digix Gold Tokens, and Digix DAO Tokens (DGD).
Otonomos BCC Pte. Ltd. (www.otonomos.com) - Otonomos is a Singapore private limited company working on the world's first blockchain-chartered company, allowing users to hold shares the same way they carry Bitcoin in their digital wallet.
Crowdfunding Platforms
Probably one of the best examples of Fintech would be the crowdfunding platforms. Companies such as Kickstarter and Patreon are utilized by individuals and businesses looking for funding outside any traditional financial institution or traditional banking.
Allow us to illustrate a picture. Pretend that you're about to start a business or project. You go out and tell people about what you plan to do. You also tell them the amount of money you need to get the ball rolling.
You kindly ask them for any amount to help fund your endeavour. You do this enough times until you reach your desired amount, and then you cash out.
However, these persons that are funding you are not considered your investors, so you don't have to worry about them having a say in your business. Instead, they're kind of like good Samaritans able to give you a few bucks to get you started.
There's no financial obligation for you to pay them back either, so it's not exactly a loan.
In essence, crowdfunding is just aptly defined by its name: funded by the crowd.
What Are The Key Features of Crowdfunding Fintech Apps?
They provide an easy-to-use interface that allows people to fund any project through the apps
Crowdfunding apps have investment charts, financial transaction records, withdrawals, and other financial reporting on their dashboard.
Payment history is available to both the user and its patrons.
Multiple payment gateways to facilitate fund transfer with ease.
What Are The Benefits of Crowdfunding Apps?
Crowdfunding apps can be a good source of financing when you don't want any investment or loan obligations from anyone.
Crowdfunding apps can accept any project from anyone. You need to set the minimum amount for cashing out the funds and the minimum amount for donation.
What Are Examples of Crowdfunding Fintech?
Kickstarter (www.kickstarter.com) - Considered one of the best places to find new projects or get a new project funded. Millions of visitors frequent this site every day
GoFundMe (www.gofundme.com) - Boasting of an easy-to-navigate website, this fintech firm is the most popular option for charities and non-profit projects
Patreon (www.patreon.com) - The most popular crowdfunding platform for content creators (from music to video games to movies)
Crowdo (www.crowdo.com) - Crowdo is a regional Fintech company in Singapore offering alternative financial solutions across securities and equity crowdfunding and peer-to-business lending.
FundedHere (www.fundedhere.com) - This is another local startup in Singapore. It's also the first crowdfunding platform to feature equity crowdfunding and lending-based crowdfunding options.
Investments: Robo-Advising and Stock Trading
Stock trading and robo-advising are considered the most innovative approach to Fintech because they changed how the asset management sector and the financial services industry work. Fintech apps use smart algorithm technology to develop trading and investing platforms for their users. The platforms enable users to make informed decisions about investing and trading.
What Are The Key Features of Robo-Advising and Stock Trading?
One of the most exciting features is form management. This allows users to have complete control over their data input and will help them streamline their answers so these robo-advisers can analyze risks quickly.
These apps will also have document repositories that will allow them to attach electronic documents on top of their forms. These are secure, and only the owners can view these documents.
These apps are updated live 24/7 for stock traders who want to sell or buy a stock at any given time.
What Are The Benefits of Robo-Advising and Stock-Trading Fintech Apps?
Users enjoy lowered costs for portfolio management. Everything is done and held through the platform. Financial advisors hired by the platform can efficiently manage the assets of different users.
Financial regulatory agencies regulate financial advisors working with these apps, ensuring that your assets are handled professionally and adequately following government regulations.
Users don't need to visit the stock exchange to buy and sell stocks. Stock trading apps make it possible for you to buy and sell them at any given time.
What Are Examples of Robo-Advising and Stock-Trading Fintech?
Betterment (www.betterment.com) - Betterment is considered one of the best portfolio management platforms in the industry. All of your assets and finances are managed through this singular platform.
E*TRADE (www.us.etrade.com) - E*TRADE is an online trading platform that accommodates novice and experienced traders alike.
IQOption (www.iq-option.com) - Similar to E*TRADE, IQOption is another trading platform. They have stocks, securities, Foreign Exchange (Forex), and cryptocurrencies.
WeInvest (www.weinvest.net)- This startup is the first digital personal finance assistant made in Singapore and provides investors with curated investment opportunities across real estate, mutual funds, and other assets.
Lending
Fintech services in the lending business are using the latest technologies to streamline traditional lending processes and add more transparency to outdated non-transparent processes.These new technologies gave lenders the power to streamline payment processing while making their policies clearer for their users.
Thanks to significant technological advancements, lenders are streamlining their out-of-date traditional processes. The innovation of Fintech lending has given lenders the power to speed up their payment processing times and de-mystify their policies. Through fintech, lenders have the ability to offer customized solutions to their users’ needs.
What Are The Key Features of Fintech Innovation in Lending?
Users have complete control over their lending experience through the apps, from account set up to system authentication to system authorization
Quick form management allows users to fill up forms with ease.
Apps feature document repositories that will enable users to host and upload their documents for easy access.
What Are The Benefits of Lending Apps?
Lending fintech apps are more efficient with their operations than traditional lending firms
Application time for loans is reduced significantly
Apps have seamless integration with credit bureaus and agencies
What Are Examples of Lending Apps?
Moolahsense (www.moolahsense.com) - MoolahSense is the first Singaporean crowd-financing platform. By connecting entrepreneurs on their crowd-lending platform, MoolahSense helps them acquire the funding they need to build up their businesses.
TALA (www.tala.co)- TALA is a fintech app that allows users to determine their creditworthiness through social connections, bills payments, texts, and calls.
OPPLOANS (www.oploans.com) - OPPLoans offers interactive courses that teach their users how to use different fintech tools. They also help lending agents recommend the ideal loans for their users and their purposes, ranging from medical bills to car repairs to mortgage.
ZWEBB (www.zwebb.com) - ZWEBB's main feature of their lending app is their risk-free way for invoice financing, allowing their users to monitor all accounting of large numbers of invoices.
Payment Gateways
Fintech revolutionized the way people are making payments online. Whether it's through electronic cash payments or cryptocurrencies, Fintech allows users like you and me to complete transactions with ease and without having to go to any bank. Online and mobile payment gateways have come a long way. Gone are the days when we have to be physically present to make any transactions. These apps and platforms are not banks themselves. Instead, they're the middlemen that navigate financial transactions between users. Companies sign up for these platforms while their users sign up and link their bank accounts through these platforms.
Companies can then facilitate payments and other transactions through the platform with a minimal fee.
What Are The Key Features of Payment Gateways?
Payment gateways and secure through SSL/TSL encryptions. These encryptions are meant to protect sensitive information such as credit card information and bank account details.
Payment gateways are regulated and have to comply with Payment Card Industry Data Security Standards. Sites that meet the standards are given the PCI DSS Compliant badge to place on their website.
Two-Factor Authentication (2FA) is required for payment gateways to provide an additional layer of security for their users.
What Are The Benefits of Payment Gateways?
Payment gateways are secure due to the encryption in place. Sensitive information is concealed at all times behind the scenes, so no one will ever be able to look them up.
Transactions are quick and easy. It usually just takes a few seconds to complete. Funds will take a few minutes up to a few days to show up on the bank accounts.
What Are Examples of Payment Gateway Fintech?
AspireApp (www.aspireapp.com) - Aspire is your one-stop shop for all your business financial needs. Enjoy their features such as borderless payments, expense management, and more all in one account.
PayPal (www.paypal.com) - PayPal is a company that needs no introduction. It's one of the widely used payment gateways by millions of businesses and e-commerce platforms globally.
Venmo (www.venmo.com) - Venmo is a payment app owned by PayPal and is similar in functionality. You can withdraw your Venmo balance to your bank accounts and make payments online through platforms that accept Venmo.
CoinPip (www.coinpip.com) - CoinPip is a Singapore-based Fintech company that makes use of Bitcoin to make it easy for employers to pay their remote workers. Payments are sent directly to their recipient's bank accounts and receive real cash.
Personal Finance / E-Wallets
E-Wallets and personal finance were beneficiaries of the technological advancements in Fintech. They've made it easy for the average Joe and Jane to manage their finances through their mobile phones.
What Are The Key Features of E-Wallet?
E-Wallets can be programmed to make scheduled transactions and fund transfers, making it easy for you to pay bills on time.
Some E-Wallets can also facilitate offline payment through the app.
Major utility providers and e-commerce sites are signed up on various E-Wallet systems, so you don't have to worry about finding the right wallet.
Funds can be transferred to and from your E-wallet regardless of source.
What Are The Benefits of E-Wallets?
You can check your balances and financial transaction history in real-time.
You can pay any amount to any provider at any given time as long as the e-wallet is funded.
You can create, personalize, and track your budget on personal finance apps.
What Are Examples of E-Wallets and Personal Finance Fintech?
You Need A Budget (www.youneedabudget.com) - YNAB is considered one of the best budgeting app out there. YNAB also features a 34-day free trial, allowing you to test the full features before purchasing. The app also has a user-friendly guide that will show you how to budget your money.
Mint (www.mint.com) - Another personal finance app that comes with a credit score monitoring feature to help you budget better.
Samsung Pay, Android Pay, and Apple Pay - The best examples of mobile e-wallets because users can pay bills, carry out P2P payments, book tickets, and a lot more. These companies are enticing their users to join by offering coupons, cashback options, rewards, and more.
Money Smart (www.moneysmart.sg) - Money Smart is one of the local startups for personal finance Fintech. They feature price comparisons for insurance, credit cards, and even loans. You can also apply for them on their site.
Moneythor (www.moneythor.com) - Moneythor is also another local Fintech company that provides white-labelled solutions for their corporate clients so they can make recommendations to their customers within their existing online banking apps.
Closing
No one knows what Fintech has in store for us in the next few years, with uncertainty plaguing economies on a global scale. Fintech ventures, services, and platforms are only as good as the economic environment they are in.
While the numbers have shown us that Fintech is growing despite the Pandemic, we can only assume so much. Perhaps we won't be seeing anything new as long as the Pandemic persists. Still, experts are convinced that there will be further opportunities for the fintech sector to break ground with economic recovery.
Consumers will still probably be using these apps and platforms that we've listed and more, and companies running these apps will still be around. Consumers will be using these apps for cashless transactions, minimal vendor contact, and convenience of handling various assets ranging from cash to stocks to Forex to cryptocurrencies.