Typically, finance is the management of one’s money that is either done by the government or by other big companies. Finance is sometimes known as the management, creation as well as the study of money, proper channels, and opportunities for investment to achieve profit.
For ages, finance has been dealing with questions like how and why an individual, company, or government acquired the money it needs and how the owner should invest or spend that money.
It also manages the processes of borrowing, lending, budgeting, saving, and forecasting. All of the above tasks are usually performed by banks and other institutes nowadays and has been like that for quite a while. It is the responsibility of the bank to keep our money secure and to provide better opportunities to invest it.
What Fintech Really is?
Fintech is basically a crossover between finance and technology. It refers to the companies that use advanced technologies to provide services to the businesses or customers that they are handling. It is a trendier and cooler version of the good old finance system provided by finance companies to their users.
The new and advanced Fintech seeks to improve the delivery and use of financial services. Currently, the aim is to compete with the conventional financial system and prove that it is better. Due to this, more and more people will opt for this method to work out their money and investment. The most basic example of Fintech is Mobile payments.
Simply put the users that don’t have access to conventional banking platforms can perform the usual tasks, like transactions, and gain access to insurance and credit online through Fintech. But there is a lot more to it than just that. It provides us with crowdfunding in which users are allowed to send and receive money from others through different platforms.
Cryptocurrency is also a very well-known application of Fintech. You can get your car, your house, or even yourself insured through the Insurtech which is another application of Fintech. It has recently received a lot of appreciation from its users. Robo advising, which is also an application of Fintech, provides algorithm-based asset management recommendations to its users.
Two Basic Types of Fintech
There are two elementary types of Fintech that are Business-to-Business (B2B) and Business-to-Consumer (B2C). In B2B, Fintech is used by the business for online banking, for obtaining loans and many other financial services like some mentioned above through smartphones.
Additionally, it provides services like customer relationship management and enterprise-oriented services which allow companies to access and manage financial data and also focus on cross border payments catering to the international needs of businesses.
In B2C, the finances are being handled between the customer and the business. Fintech is being used in many B2C applications like Apple Pay, PayPal, or Venmo. This allows the user to performs operations like funds transfer through the internet.
Budgeting apps let the user manage and track their finances that help the user understand what their high points of spending are, where the money can be saved or where they are overspending. An example of such apps is Mint.
Why Transitioning to Fintech is Need of the Hour?
During the pandemic that we are facing, no one wants to leave the safety and comfort of their home to pay bills or do funds management. Everyone wants to do perform these tasks from the comfort and safety of their homes.
The situation we are facing can be the push Fintech was waiting for. We read news about robots replacing humans in businesses with high contact human to human contact possibility almost every day.
So, Fintech is also capable of reducing human contact by shifting all of the finance management online. The time is in favor of Fintech companies as more and more people are opting for payments and financial management online.
According to research, the difference between the performances of two systems in terms of financial inclusion is relatively small but still, there are so many advantages of Fintech over traditional financial banking.
For starters, Fintech developers are forcing financial services to evolve into a more customer-centric sphere than previously experienced. Integrating their businesses with Fintech firms will let them be more thoughtful about the ease of customers and will also help them go mainstream.
The World Fintech Report suggests that by now 50.2% of global banking customers are using Fintech products and services. The Finance technology is more popular with younger, affluent and tech-savvy users looking for value for money over a one-stop-shop.
Fintech is comparatively new in the business and giants like conventional banking systems have been in the market for ages. Full conversion to Fintech seems near impossible as of now because the old and experienced people that are actually conducting most of the business in this world and are using the traditional finances and banking systems for conventional banking and finance management.
Converting these people seems impossible and the only chance for Fintech is to target the youth and play out their plan keeping in mind that their major audience is young. Targeting youth of this time can lead to a trend of Fintech in these users creating a space for Fintech in the next 15-20 years.
The Fintech sector is rapidly growing each day, however, it still small and though perhaps inspiring outdated organizations to change rapidly than they might have otherwise, Fintech alone would not be dominating the financial services sector anytime soon.
There is a lot of work that needs to be done by those in the industry and those who bring about and direct the Fintech revolution, but for some time we will have to see this industry struggle in making its place and space in this world of ours. The future of the Fintech industry is still in doubt but many minds are assured that Fintech will have a considerable role in the near future.
Many of the countries that are integrating Fintech in their systems are being cautious about the security issues that they might face. United States lawmakers are making an allowance for a framework for Fintech organizations, while many states have implemented their own set of rules by now.
Since digital currencies and blockchain formulate a central part of so many Fintech products and services, running the Fintech industry is a very delicate task to do. There are many progressive institutions that are not waiting for the Fintech to become the norm and are already benefiting from all that Fintech offers.
I, as a part of this society, would also prefer my finances to be managed by Fintech. Also, the clients are more than pleased to avoid the stuck-up behaviors of financial institutions. And after all, who does not like an innovative and vibrant bunch of service.