Fintech Innovations

Financial technology (better known as fintech) is used to describe new technology 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. It is composed of specialized software and algorithms that are used on computers and smartphones. Fintech, the word, is a shortened combination of financial technology.

When fintech emerged in the 21st century, the term was initially applied to the technology employed at the backend systems of established financial institutions, such as banks. From 2018 or so to 2022, there was a shift to consumer oriented services. Fintech now includes different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management, to name a few.

Fintech also includes the development and use of cryptocurrencies, such as Bitcoin. While that segment of fintech may see the most headlines, the big money still lies in the traditional global banking industry and its multitrillion dollar market capitalization.

What counts as fintech?

Digital banking and payments

• Mobile banking apps that allow users to manage accounts, transfer funds, and pay bills on their smartphones
• Digital wallets that enable contactless payments using mobile devices or wearables
• Peer-to-peer (P2P) payment systems that facilitate direct money transfers between individuals
• Neobanks: digital-only banks without physical branches that have fully online banking services

Investment and wealth management

• Robo-advisors: automated investment platforms that provide algorithm driven financial advice
• Online brokerage platforms that allow users to buy and sell stocks, bonds, and other assets online
• Micro-investing apps that enable users to make regular, small investments
• Algorithmic trading that uses computer programs to execute trades based on predefined strategies

Lending and financing

• P2P lending platforms that connect borrowers directly with lenders, bypassing traditional banks
• Crowdfunding platforms that allow individuals or businesses to raise funds
• Online lending platforms that provide personal, business, or student loans with simpler digital processes
• Alternative credit scoring that uses nontraditional data to assess creditworthiness

Insurtech

• Online insurance platforms that allow users to compare and purchase insurance policies
• Usage-based insurance that calculates premiums based on usage of a product or service
• Claims processing tools that simplify the insurance claims process using artificial intelligence (AI) and automation

RegTech

• Compliance software that helps financial institutions comply with regulations and mitigate risks
• Fraud detection that uses AI and machine learning (ML) to identify and prevent fraudulent activities
• Anti-Money Laundering (AML) solutions that monitor and report suspicious financial transactions

Blockchain and cryptocurrency

• Cryptocurrency exchanges: platforms for buying, selling, and trading cryptocurrencies such as Bitcoin and Ethereum
• Payment systems that use blockchain technology for secure, transparent transactions
• Decentralized finance (DeFi) platforms that provide financial services without intermediaries using blockchain

Examples of fintech

• Robo-advisors are apps or online platforms that optimally invest your money automatically, often for little cost, and are accessible to ordinary individuals.
• Investment apps like Robinhood make it easy to buy and sell stocks, exchange-traded funds (ETFs), and cryptocurrency from your mobile device, often with little or no commission.
• Payment apps like PayPal, Venmo, Block (Square), Zelle, and Cash App make it easy to pay individuals or businesses online and in an instant.
• Personal finance apps such as Mint, YNAB, and Quicken Simplifi let you see all of your finances in one place, set budgets, pay bills, and so on.
• Peer-to-peer (P2P) lending platforms like Prosper Marketplace, LendingClub, and Upstart allow individuals and small business owners to receive loans from an array of individuals who contribute microloans directly to them.
• Crypto apps, including wallets, exchanges, and payment applications, allow you to hold and transact in cryptocurrencies and digital tokens like Bitcoin and non-fungible tokens (NFTs).
• Insurtech is the application of technology specifically to the insurance space. One example would be the use of devices that monitor your driving in order to adjust auto insurance rates.