What is a Fintech ? This is the most asked question whether someone is a Fintech enthusiast or a Software developer or a banker or a student of the industry. What is that separates a Fintech from a Financial institution ? Why Fintech are not the same as banks as basically they are providing similar solutions ? Will Fintech replace banks ? To all these queries and to give a detailed explanation here we are showcasing various industry application along with examples and the road ahead for Fintech.
What is Fintech Industry?
What is Fintech or Financial Technology ? – Fintech is termed due to Technology and cutting-edge innovation which a Fintech company can introduce to better the existing Financial services provided by old players whether they can be Government Financial institutions, Banks, Regulatory bodies, exchanges etc. to name a few. The new age Fintech industry are competing with the existing players in terms of delivery, speed, quality of interaction, easy accessibility and access, lesser utilization of resources and quick resolution of problems.
What is Fintech Industry
Fintech can be of several types based on the kind of services they provide or the product they develop. Some of the Fintech Innovation & some Fintech Examples are listed below:-
Digital Banking/Banking –
The basic entity of Finance which is user facing are the banks. Now, the definition of Banks are changing, earlier brick and mortar physical entities have branches, then core banking concept was introduced and now you don’t need a physical entity at all. Now with the advent of Fintech in Banking Digital first banks or Neobanks which are online only. Some of the examples are Fi(fi.money), Chime(Chime.com) etc. The day is not far when Fintech will replace Banks.
Payment Gateway –
In the online world of shopping, Paypal is the best example of Fintech, payment gateway is the most basic an user will identify with, started with Credit card, Debit Card, Net banking to use of digital wallets, UPI and crypto currency. Payment gateways had evolved over the years. Clients are businesses like Amazon, Flipkart, Alibaba and other big and small businesses who were selling their services or physical products online. E.g. of various payment gateways are Alipay, Citruspay, CCAvenue etc.
A combination of a bank account and a payment gateways is an example of a Digital wallet. In this wallet, some amount of money is preloaded from bank accounts using a debit card or a credit card or using UPI, then this money is used to pay for shopping or for availing services. Now a days, almost every online service provider e-Commerce have their own wallets, whether it is Amazon, Uber, Paytm. It gives the user convenience and quicker exit.
Digital Insurance –
Fintechs exploring the insurance industry are changing how traditional life and health insurance was carried out. Some of the new Insuretechs are customizing the premiums as per the requirements, some of them are ensuring cheaper coverage plans to woo the end customer, better practices, services and delivery are a few spaces among the vast possibilities.
Buy Now Pay Later (BNPL) –
Banks and lenders neither have the resources nor have the time to pursue small ticket loans lets say $100, Rs 2000, 100 Euro. This opportunity was sensed by a lot of fintechs and eCommerce. They easily understood a gap over here. Most of the consumers have less buying power but the desire is always there, to cater to this particular segment, BNPL had started to evolve in various forms for shopping, small loans and for other purposes. Regulations also help as the ticket size is low and the chances of defaulting are less as well
Peer-to-Peer Lending –
Recently In India a company called BharatPe launched an App called “12% Club”. Through this an individual can invest and borrow at 12% interest. Through this the investors will be lending to merchants who were leveraging BharatPe’s payment infrastructure. Another Indian Startup Cred also forayed into the P2P lending space by launching a Product called “Cred Mint” but its Member to Member. So these are 2 different kind of P2P Fintech lending model.
Transactional Business Model –
This model is generated by leveraging huge amount of data, analysing the data and preparing reports and giving insights into consumer behaviour. Most of them create free products like expense management apps, Card management apps, Bill payments Apps etc. E.g. CRED, Wizi – The Super App for everything Credit Cards etc.
Alternative Credit Rate Scoring App –
This is mostly helps the small business consumers whose application for loans or Credit cards are rejected because they don’t have a salary slip to show though they might be having a steady source of income. So Fintech companies create a mechanism and take many other data points from similar groups which and create a model using algorithms ot access such profiles and get real Score based on which they can process a request for Credit
Asset Management –
Fintechs had almost entered every space, they are challenging existing models. Earlier whenever you were trading in stocks or buying mutual funds, you have to pay brokerage. Now, Fintechs are allowing you to trade for Free. They might be using your data or studying your buying behaviour. This is how most Fintech companies make money.
Challenges for Fintech –
- Cybercrime or Data safety
- Use of Bigdata
- How it will impact the future of Banks and vice versa
- Very futuristic and ahead of time technology
- Regulatory challenges
- User & Employee retention
- Usability of a feature
Fintech Trends to watchout for : –
- Improvement in online banking services
- New and improved products/apps/services for millennials and the older generations
- Improved Fin assistant for decision making
- AI & Robotics for improved services, trends and forecasting of user behaviour
- More secured transaction
The Road Ahead
There are huge opportunities and gaps to fill for the Fintech Startups, to become Giants of the industry they need to work out on the immediate problems and to understand the consumer behaviour and consumer needs. As most of the Fintech startups are heavily funded, they are burning huge amount of cash and wasting resources. Most of them are trying to venture into spaces where there is no market demand at all. Some of them are ignoring or missing the basic business ethos resulting in their closure. Fintechs need to avoid this funding mirage and start focussing on real users, real solutions and real growth
What is Fintech?
Fintech or Financial Technology can be defined as the technological innovation which are done on the existing Financial Services thereby completely changing the existing landscape. The innovation could be on terms of faster delivery of service, interactive UI, quick redressal mechanism using bots, contactless delivery, easy management of finances, analytics, forecasting etc. to name a few. Most Fintech compete or work together or work on top of the existing financial services.
What is Fintech Industry?
The Fintech industry in totality is a very vast collection of Corporates and Startups catering to various kind of products and services as a whole. The product or service can be a Credit Card product innovation, a neo banking or digital banking innovation or a card management platform or now in vogue Buy now pay later option or APIs connecting existing Financial institutions to cutting edge service provided by Fintechs or the heavily discussed and debated ‘Cryptocurrency’ to name a few.
How to start a Fintech Startup/Company?
If you are solving a Financial problem using any kind of technology or innovation better than the existing solution and if you are following the regulations/laws set by the regulatory bodies. You are good to go.
Which is the best Fintech Startup Company?
The answer to this question will always be ‘It depend’. It depends on what kind of products/services you are looking for since Fintech is not limited to a particular field/sector. Also, the need, demand and expectations varies from user to user. Yet there are market leaders in every vertical of Fintech. Yet Global leaders are very few. Most of the Fintech leaders are restricted to a particular geography as Financial Laws and Regulatory requirements are different for different regions.