The word “fintech” probably isn't a word you use very often. It may not even be a term you are familiar with yet. Either way, there's a very good chance that you use fintech on a daily basis. (And if you're don't, you probably should be.)
Fintech, a shortened combination of the words “finance” and “technology", is an emerging industry that plays an increasingly important role in our lives. Here's what you need to know about the state of fintech today, including the trends to watch and the companies driving them forward.
In its broadest sense, fintech is the marriage of financial services and technology to make life simpler and faster for the consumer. Fintech describes companies that use software to provide financial services, and it includes anything from mobile payment apps to cryptocurrency, such as bitcoin.
A perfect example of fintech in our everyday lives is mobile banking. Through the technology of smartphones, as developed by companies like Apple and Samsung, we can perform financial functions on our mobile devices, such as making transfers between checking and savings accounts, or depositing checks. This means no longer having to wait in line to make a deposit or having to mail in a slip of paper to request more checks. Greater accessibility and transparency, as shown here, are just a few of the many advantages of fintech.
To better understand how fintech works, let's take a closer look at some of its various applications, including the most notable fintech trends and companies.
If you have a smartphone, you likely use it to make payments. Increasingly sophisticated technology allows consumers to make payments directly from their mobile devices.
Venmo is an excellent example of this. If a co-worker of yours asks you to chip in $10 for a birthday gift for the boss, instead of finding a ten-dollar bill, you can simply transfer $10 from your Venmo account to theirs using the Venmo app. All you have to do is link your checking account or credit card.
Apple Pay and Alipay are two mega-companies that offer mobile or online payments.
Gone are the days of having to rely on a stockbroker to execute trades for you. Their fees and commissions drove up the price of trading and reduced overall returns to investors.
Fidelity and E-Trade are two examples of fintech trading platforms. Investors can research, buy, and sell stocks, bonds, or derivatives from their smartphone or laptop, with new technology emerging to provide more in-depth research and faster trade execution.
Many people find making a budget tedious and constraining. Tracking expenditures by reviewing banking and credit card statements and then categorizing them is tedious work, which most people find challenging to do consistently.
One of the original and best-known budgeting apps is Mint. It automatically categorizes your transactions from linked credit and debit cards, categorizes the money spent, and tracks them against your budget. You can tell at a glance if you’re staying within your monthly spending guidelines. This is fintech at its finest.
Technology has disrupted the insurance industry as well, creating a subdivision of fintech that has been appropriately deemed insurtech. Rather wading through a sea of paperwork, people can now research and buy insurance online, which reduces costs and expedites the delivery of insurance products, such as disability insurance.
It reduces the need for insurance agents to pay physical visits to insurance applicants. This lowers the overhead expenses of insurance companies, which can be passed on to policyholders.
People are even applying for mortgages online through the use of fintech. Rocket Mortgage, developed by Quicken Loans, is a prime example. You simply enter your personal information into the app, add the price of the home, and your financing choices, and you know within minutes if you qualify for the mortgage. Licensed mortgage advisors are made available with a simple tap.
Another fintech example would be PayPal, the well-known payment portal. Many individuals and businesses use PayPal to transfer money. If you’ve ever bought something on E-Bay or Etsy, you have used PayPal to make payment. It’s very convenient for small businesses since they don’t have to set up payment processing through Visa or Mastercard and pay their transaction fees.
Fintech is the future of all things personal finance, from budgeting and saving to investing and trading to insurance and lending. Industry leaders are creating a new and wide range of financial products and services, designed to make money management more accessible, quicker, and more efficient. Advancements in technology allow companies to better serve consumers by providing more efficient and transparent experiences.
With the speed of life constantly accelerating due to new-and-improved technology, fintech helps us adapt to these rapid changes by being more productive, organized, and informed. Finances are an integral part of all of our lives. Anything that helps us better manage money is something we can all use.
Jack Wolstenholm is the head of content at Breeze.
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