Unlocking the Future: The Booming World of Fintech Explained
, by Unboxify, 6 min reading time
The Booming World of Fintech: A Comprehensive Guide 🚀
It's fast become one of the big buzzwords in business and technology. It's one of the hottest properties to invest in, and you can be sure it's only going to get bigger and bigger. But stick with us until the end, and you'll see how a lot of people have no idea what the word "fintech" even means. You don't need a degree in computer science or finance to figure out it's an abbreviation for financial technology. But when it comes to fintech, whether you're in the dark or well clued up, we thought we'd shed a bit more light on this hot topic.1. Traditional Banks Are Worried About It 💸
Until a few years ago, banks had a tight hold on pretty much anything we did involving money. Being the huge, bloated dinosaurs that banks are, there wasn't exactly much incentive for them to innovate or be competitive. Fast forward a few years, and a few leaps ahead in digital technology, and it's time for smaller, more agile players to make an entrance. You got it—fintech. In the last decade, fintech companies have been giving banks a real run for their money. As innovation expert and fintech VC Arvind Sankharan put it, "We're witnessing the creative destruction of financial services rearranging itself around the consumer who does this in the most relevant, exciting way using data and digital wins." The more you see the word fintech cropping up in your news feeds, you can be sure the more headaches old-fashioned bank managers are getting.2. The Term Includes Sectors You Probably Didn't Think Were Fintech 📊
Put simply, fintech companies unbundle all the different types of financial transactions that banks traditionally do. As each fintech tends to specialize in just one area, they focus on doing it in a way that's efficient, streamlined, and as user-friendly as possible on a digital interface at a low cost to the consumer.- Payment platforms: Square, PayPal
- Stock trading platforms: eToro, Robinhood
- Cryptocurrencies and crypto trading platforms: Coinbase
- Neo banks: Chime, TransferWise, Revolut
- Crowdfunding: Kickstarter, GoFundMe
- Online charity fundraising platforms: Patreon
- Health insurance platforms: Oscar
3. It's Lifted Millions of People Out of Extreme Poverty 🌍
One of the fantastic advantages of fintech is bringing financial services to people who couldn't access them before—often those without a regular income or a permanent address. A shining example of this is M-Pesa, released in Kenya in 2007, which transforms your smartphone into a bank account. Since M-Pesa was launched, it's raised 2% of Kenyans—around 200,000 households—out of poverty and has positively impacted many other Africans.4. It's Revolutionizing the Loans Market 💳
Applying for a loan used to be tied up in endless bureaucracy, but fintech has streamlined this process for a lower cost. Now, apps and websites help you compare credit card loans easily. This includes:- Peer-to-peer lending platforms: Prosper, Lending Club
- Business loans: Kabbage, Lendio
- Mortgage applications: Sofi
5. They Could Make Traditional Credit Ratings Obsolete 🛑
Fintech lenders like Affirm and Upstart are transforming how creditworthiness is determined. They use various data points, such as employment history, instead of traditional credit scores. This opens up new opportunities for people with bad or no credit ratings.6. Cyber Security Is Still a Big Concern 🔒
Given the nature of fintech companies holding vast amounts of sensitive data, cyber security is a critical issue. Figures from last year show that 27% of fintech companies have experienced a security incident, and 29% aren't sure because they haven't checked. While improvements are likely with more investment, the need to take cyber security seriously cannot be overstated. For that, we strongly recommend using a VPN.7. Investment in Fintech Is Going Up Exponentially 📈
The fintech sector has seen over $300 billion invested in the past decade. According to Goldman Sachs, the market worth of all fintech firms is $4.7 trillion. Notable investments come from big tech firms developing their platforms, such as Apple Pay and Google Wallet, and securing financing for nearly 12,000 fintech startups globally.8. The Word "Fintech" Originally Described the Backend Technologies of Traditional Banks 💾
The term "fintech" was first recorded in 1971 to describe the back-end technologies used by banks. It's ironic how it now refers to the competition of these traditional financial institutions. The first global fintech was PayPal, launched in 1998 by Elon Musk.9. It's a Huge User of Machine Learning and AI 🤖
Fintech companies are among the largest users of machine learning and AI, leveraging these technologies for:- Robo-advisors: Algorithms that automate investment advice
- Cyber security: Programs to detect fraud
10. Other New Technologies Too 💡
Fintech also incorporates:- Chatbots for customer support
- Predictive behavior analytics in insurance
- Blockchain technology
11. They Can Improve Your Spending Decisions 💵
Personal finance apps like Mint, Money Dashboard, and Credit Karma help people budget better and save more. These apps often use gamification elements to make saving more engaging and enjoyable.12. The World's Biggest Fintech Is a Subsidiary of Alibaba 🏢
Chinese Ant Group, valued at over $60 billion and employing 10,000 people, owns Alipay, UA-Bow, and Sesame Credit. This puts it ahead of Western fintech giants like Apple Pay and Google Wallet.13. Asia Is the Biggest Consumer of Fintechs 🌏
According to an Ernst & Young survey, China and India have fintech adoption rates of 87%, with South Africa not far behind at 82%.14. The USA Is the Biggest Producer of Fintechs 🇺🇸
Silicon Valley leads globally in fintech density. Surprisingly, Lithuania and Estonia also rank highly in the top ten, showing how diverse the fintech landscape is becoming.15. Fintech Is Known for Its Relaxed Work Ethic 😎
Unlike traditional banks, fintech companies often feature casual dress codes, staff happy hours, and in-office yoga classes. This modern workplace culture is already attracting top talent from traditional finance sectors.Fintech: Revolutionizing Finance, Yet Still Misunderstood by Many 💡💰
Despite transforming financial services, many people still don't know what fintech is. According to a USA survey by Ernst & Young, 63% of people have never heard the term "fintech," and only 16% could attempt to define it. If you enjoyed this blog, make sure to subscribe for more quality content every day!Blog posts
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