With the growing popularity of online banking and cashless payments, the fintech industry is constantly evolving and becoming more significant in the market share, which makes it worthy for companies to incorporate this technology into their software. As COVID-19 pandemic influenced our economy, the demand for digital financial solutions has skyrocketed, resulting in a surge of interest in the fintech market.
This shift towards digitisation has provided a new normal for consumers and created opportunities for companies to showcase their expertise and gain a larger market share. In this article, you will find out what fintech is, its different types and trends. We will also address if fintech is resilient to the current crisis. Moreover, we will present the strategies and tactics focused on fintech that companies can use to build visibility and establish themselves as leaders in the industry.
What is Fintech? Definition
Financial technology, also known as fintech, refers to integrating technology into financial services. It encompasses a wide range of innovations and solutions to improve and streamline traditional financial processes and create new, more efficient ways for consumers and businesses to manage their financial affairs.
Examples of fintech include mobile banking apps, digital wallets, peer-to-peer lending platforms, and robo-advisory services. The fintech industry continues to grow and evolve, bringing greater convenience, accessibility, and security to the financial world.
Fintech in numbers
The fintech revolution is rapidly taking the finance world by storm, with a projected compound annual growth rate of 8.6%. The volume of financial transactions conducted via fintech is expected to skyrocket, reaching $6.6 trillion by the close of 2021. That’s up from $5.47 trillion in 2020.
Still need convincing? Consider these impressive statistics:
- 90% of smartphone users are already making mobile payments.
- The largest FinTech company in the world, Ant Group, has a net worth of over $300 billion.
- 23% of US consumers already use FinTech services, which is expected to soar in the coming years.
- 94% of financial service companies believe FinTech will drive growth in their sector.
- Don’t miss out on the opportunity to join the FinTech boom. Now is the time to start your own FinTech startup and ride the wave of success.
A Brief History of FinTech
Financial technology has its roots in the late 20th century, with the advent of electronic financial transactions and advancements in computer technology. However, it wasn’t until the early 2000s that fintech began to gain significant momentum, with the rise of online banking and the launch of innovative start-ups in the payments space.
Over the next decade, fintech continued to evolve, driven by the growth of mobile technology and the increasing digitization of the financial industry. Today, fintech encompasses a wide range of technologies and solutions, from mobile banking and digital wallets to blockchain and artificial intelligence, all aimed at transforming how we manage our financial lives. As technology advances, the fintech industry is expected to play an increasingly prominent role in shaping the future of finance.
Types of Fintech applications: Examples
Financial technology is responsible for many processes that we use daily. There are many types of fintech and each of them has a different purpose for users. Here are the main types of them:
- Mobile Payments and Digital Wallets:
These enable users to make payments using their smartphones and store payment information, respectively. Applications that fall into this category are Apple Pay, Venmo and PayPal.
- Lending and Crowdfunding:
Technology streamlines the loan application process and crowdfunding platforms allow individuals to fund projects or ventures. Lending Club, Kabbage and Kickstarter are examples of this type of fintech.
- Investment Management:
Technology provides financial advice and manages portfolios, often cheaper than a traditional advisor. Examples of those applications are Betterment, Wealthfront, and Robinhood.
This technology is the basis for cryptocurrencies and has applications in many finance areas. The most popular applications are Bitcoin, Ethereum, and Ripple.
- Insurance Technology:
Firms are transforming the insurance industry, from improving claims to offering new coverage. Lemonade, Policygenius and Oscar are biased on this type of fintech.
- Personal Finance Management:
These are the tools that help consumers manage their finances more effectively with examples like Mint, Personal Capital and Credit Karma.
- Regulatory Technology:
Companies assist financial institutions and government agencies in regulatory compliance. The best examples are Regulatory DataCorp, Accuity and Refinitiv.
Successful Fintech Startups
The development of fintech is an excellent solution for many companies. As its market expands and its popularity grows more and more businesses focused on fintech are becoming successful. Here are just a few examples of thrones that prosper very well:
Square: Square’s mobile point-of-sale system has made it easier than ever for small businesses to accept credit and debit card payments, leading to its widespread success and adoption.
Robinhood’s app-based brokerage has made investing accessible to new consumers, leading to rapid growth and widespread popularity.
Stripe’s payment platform provides a seamless checkout experience for consumers and has helped many businesses grow by simplifying their payment infrastructure.
SoFi’s innovative approach to personal finance and commitment to helping people achieve their financial goals has made it a standout player in the fintech industry.
Chime’s user-friendly mobile banking app has made traditional banking more accessible and has contributed to its growing success and popularity.
Each of these startups has disrupted the traditional finance industry, and all of them have experienced rapid growth and widespread success. Nonetheless, the prosperity of a company does not have to depend on building software only focused on fintech. This technology could be a great addition to existing apps and a feature enhancing the project’s affluence.
Fintech in 2023: predictions and opportunities
As fintech gains popularity and more companies that include this technology prosper, it’s worth following the trends and being up to date with this topic. Knowing the predictions, you could plan your next move and expand your business in the right direction.
Predictions to consider:
According to Fintech Magazine, embedded finance will become a prominent trend in the coming year. B2B and B2C businesses are expected to integrate financial and banking services directly into their user experience. Jeff Winner, CEO of Happy Money, believes that embedded financial services will soon become the norm and predicts a rise in consumer lending solutions.
As reported by Victoria Treyger of TechCrunch, 2023 will see the rise of fintech opportunities in seemingly “boring” areas such as fraud prevention, compliance, payment operations, taxes, and infrastructure. With CFOs focusing more on the bottom line, fintech demonstrating improved payment authorisation and reconciliation rates or reduced fraud will have the upper hand.
Linas Beliūnas, in his top fintech predictions for 2023, highlights the importance of Open Banking and Open Finance. As more financial institutions open their data and functionality through APIs, there will be a rise in fintech firms developing innovative products and services using open banking infrastructure.
According to Timothy Li of Crowdfund Insider, the ” rent-a-charter ” era will end in 2023. Most banks are no longer taking on new fintech partners and BaaS solutions are struggling to find alternative bank partners. The result is expected to be a mass casualty among fintech relying on bank partners for lending and credit card issuance.
Fintech in ESG:
Another big trend in the fintech industry is to use this technology in the ESG area. This synergy refers to the projects that focus on environmental, social, and governance factors and the investment decisions are combined with financial technology. This approach aligns financial returns with personal values and helps address the global sustainability challenges facing our planet. The growing popularity of fintech in ESG can be attributed to the increasing awareness and demand for sustainable investing among consumers and the financial industry’s recognition of the potential for long-term gains from ESG-focused investments. In this context, fintech companies offer innovative solutions to make ESG investing accessible and convenient for individuals, contributing to its growing trend. The most famous examples are Klarna or Revolut, which use financial technology and focus on sustainability or social and governance factors.
Financial technology, or fintech, is widespread and prosperous and can be used in many areas. From small start-ups to big enterprises, implementing this technology into your business’ project will benefit you greatly.
Once you consider investing in fintech, it’s worth knowing the upcoming trends and predictions to fully maximise the success potential of your software. It is also important to distinguish different types of fintech as it will help you understand the technology better, thus choosing wiser and being more aware of the topics in the meetings with your development team.
Therefore, fintech has a significant impact on the future and should be considered as an excellent opportunity to grow the company. If you are looking for a reliable team with experts in this area, contact us here.