What is Fintech?
The term “Fintech” is a combination of financial innovation and financial technology. It refers to the use of technology and innovation to simplify and enhance the usage and delivery of financial services. At its most basic level, fintech is used to assist individuals, business owners, and corporations manage their financial procedures, transactions, and lifestyle more efficiently through the use of specialized software and algorithms that run on computers and/or smartphones.
In the past, the use of fintech was mostly common in the back-end systems of large financial organizations. However, over the years, it has moved toward more consumer-friendly services. Today, fintech includes a wide variety of businesses and sectors, e.g. investment management, non-profit fundraising, retail banking, education, etc.
Fintech also led to the use and introduction of cryptocurrencies, e.g. Bitcoin. While this is one of the more popular sectors fintech is known for, the main money is still in the traditional global banking business.
The Key Differences Between Fintech and Traditional Financial Services
Although there are many similarities between traditional financial services and the fintech industry, the two are ultimately built with different organizational structures and values. Following are the examples that highlight the difference between fintech and traditional financial services:
- In the past, opening a bank account was a hassle as you would have to go to a bank branch with a lot of required documents. Now with fintech, you can proceed by simply using a mobile application with an internet connection no matter where you are.
- Digital Wallet is another convenience that makes fintech different than traditional banking. It’s very easy to spend the money in your account with Fintech. There are a lot of other fintech services that make the consumers’ lives easier, e.g. check deposits, money transfer via smartphone, etc.
- Finally, fintech services are relatively more accessible, personalized, and flexible while the rules and regulations of a traditional banking system are rigid and challenging.
The Various Benefits of Fintech for its Users
Following are the primary benefits Fintech has to offer to its users:
Cost Effectiveness
Since no physical structures are required for fintech, there is no need to spend on them. Because of this, there is a significant price advantage as opposed to traditional banking and financial services.
Practicality
Fintech is much faster and offers relatively more convenience because its solutions are available in digital environments. It is naturally more practical.
More Service Options
Fintech services are more diverse than traditional banking services. This is due to the fact that they are not limited to the geographical location of users.
Personalized Experience
Fintech has a lot of technological possibilities, particularly for businesses as they can take advantage of them to get more effective and detailed information about their customers. Fintech organizations that utilize this information can offer more personalized, better services to their clients to improve customer satisfaction.
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References:
https://www.investopedia.com/terms/b/bitcoin.asp
https://corporatefinanceinstitute.com/resources/knowledge/other/digital-wallet/
https://www.accountingweb.co.uk/community/industry-insights/a-quick-beginners-guide-to-fintech
