Fintech (Financial Technology) (2024)

Introduction – What is Fintech?

Financial technology or Fintech for short aims to compete with traditional financial methods in the delivery of financial services.

It is a developing industry that uses technology to improve financial activities. Financial technology firms include both start-ups and established financial institutions. Fintech technologies include the use of smartphones for mobile banking, small business loan applications, investing, various borrowing services, and cryptocurrency. The term “Fintech” refers to a new financial industry that uses technology and software systems to improve financial activities/experiences.

Types of Fintech systems:

Fintech is a very large area that encompasses a range of different systems including the following:

Investments: This may include the purchasing of stocks, futures or commodities such as Gold or Silver.
Risk management: Every investment involves some level of risk, so risk management systems are used to collect data and assist in determining whether a transaction/investment is promising or should be avoided.
Trading: Trading involves the buying and selling of financial assets such as shares, bonds and other types of investments.
Banking services: Fintech solutions can help facilitate banking services such as lending money, foreign exchange and more.
Neobanks: These are alternatives to traditional banks and are “digital first”.

Notable platforms in the space

PayPal

With it’s roots back in 1998 PayPal was one of the first major successful consumer payment platforms that gained prominance and is still considered a major player in the space.

PayPal is used almost everywhere from eCommerce websites to buying and selling platforms and provides a safe way to transact money online.

Stripe

Stripe is another major payment gateway based out of San Francisco in the USA and focuses on developer integration and as such is ubiquitous and integrated into thousands of buyer/seller marketplaces and subscription payment platforms to automatically handle payments across dozens of currencies and support different types of credit cards.

Payoneer

Payoneer is another popular platform focused on international money transfers and is common in countries where PayPal or others don’t currently operate such as Pakistan at the time of writing.

Payoneer allows individuals and businesses to send and receive money between them funded by bank account transfer or credit card and quickly have the funds received by the other person or business.

Binance

When it comes to Crypto trading applications Binance is a significant player in the space which enables people and businesses to buy/sell Cryptocurrencies as well as NFT assets and deposit money in different currencies like USD and Euro.

Related guide: List of platforms to help you accept Cryptocurrency payments on your website

Wise (formally TransferWise)

Wise (formally TransferWise) is another popular payment application with its roots originally in Estonia where it was founded.

Similarly to Payoneer it is designed for quick peer-to-peer payments between individuals and businesses but focuses on high speed and has lower fees compared to some other platforms.

Cashapp

Cash App (formerly Square Cash) is a mobile payment service available in the United States and the United Kingdom that allows users to transfer money to one another via a mobile phone app (for a 1.5% fee for immediate transfer).
In September 2021, the service reported 70 million annual transacting users and a gross profit of US$1.8 billion.

Square

Square is another popular payment gateway mostly used in POS systems but also operates as a standalone payment application enabling businesses to accept and pay with different types of credit cards

Venmo

Concerns over the technology

In July 2018, the Trump Administration issued a policy statement allowing FinTech companies to apply to the federal Office of the Comptroller of the Currency for special-purpose national bank charters.

Another issue that regulators are concerned about is data security, which is concerned because of the threat of hacking as well as the need to protect sensitive consumer and corporate financial data.

Fintech companies in the European Union are required to follow data protection laws such as GDPR.
Any data breach, no matter how minor, can result in direct liability to a company depending on the laws of the country.

The online financial sector is also becoming a more popular target for distributed denial of service (DDoS) extortion attacks and other types of intrusions like Phishing.

Technologies leveraged

AI (Artificial Intelligence) & Machine Learning

The use of Artificial Intelligence has enabled Fintech solutions to learn from data over time and use it to make predictions for the future with similar behavior/traits to a human mind and its reasoning behind decisions. AI along with machine learning can help software systems become more accurate over time and learn from mistakes as more data is processed.

Cryptocurrency

Cryptocurrency is a digital asset that functions like a traditional currency however is decentralized and cannot be controlled by a central body like a traditional bank. Fintech solutions working with Cryptocurrencies like BitCoin, Ethereum, and others contain features such as the ability to send and receive funds or make investments and track the price of a currency.

Since the early days of Crypto and rise of Bitcoin the technology has become more mainstream and from 2017 onward there were efforts to simplify the purchasing and management of these assets by various companies offering Crypto exchanges.

We have covered many of these vendors in articles on our blog such as the following:

List of quality Crypto exchanges for Australians

List of quality Crypto exchanges for New Zealanders

Recommended Crypto exchanges that work in Dubai and the United Arab Emirates

BlockChain

A Blockchain is a growing list of records, called blocks, that are linked together using cryptography. Each block contains a cryptographic hash of the previous block and transaction data. Once recorded, the data in any given block cannot be altered retroactively without altering all subsequent blocks.

Blockchain technology is used alongside Cryptocurrency and Fintech solutions often leverage it to keep track of transactions and verify their integrity. Banks are interested in this technology because it has the potential to improve the speed of back-office settlement systems in various financial services.

Automation

By leveraging automation in general Fintech software can speed up traditional operations in the finance sector such as reporting, responding to questions, handling support requests, and detecting fraud more efficiently.

Web-based applications & websites

Conclusion

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Source(s)/Bibliography:

Commemorates 150-year history – Marcus by Goldman Sachs leverages technology and legacy of financial expertise in dynamic consumer finance platforms. (n.d.). Retrieved May 04, 2021, from https://www.goldmansachs.com/our-firm/history/moments/2016-marcus.html

Financial technology. (2021, May 04). Retrieved May 04, 2021, from https://en.wikipedia.org/wiki/Financial_technology

April 23, 2. (n.d.). Data security considerations for fintech companies. Retrieved May 04, 2021, from https://web.archive.org/web/20170905104224/https://www.bna.com/data-security-considerations-for-fintech-companies/

Katrina.Tuliao, CC BY 2.0 <https://creativecommons.org/licenses/by/2.0>, via Wikimedia Commons

Arnold, M. (2016, September 23). IBM in blockchain project with China UnionPay. Retrieved May 04, 2021, from https://www.ft.com/content/719f4e7e-80e1-11e6-bc52-0c7211ef3198

“Cash App” Wikipedia, 13 Jan. 2018, en.wikipedia.org/wiki/Cash_App. Accessed 28 Feb. 2023.

“Venmo” Wikipedia, 18 Apr. 2015, en.wikipedia.org/wiki/Venmo. Accessed 28 Feb. 2023.

The following icons are licensed under Creative Commons (Attribution 3.0 Unported)

www.iconfinder.com/icons/2890583/download/png/512. Accessed 28 Feb. 2023.

www.iconfinder.com/icons/2909601/download/png/512. Accessed 28 Feb. 2023.

www.iconfinder.com/icons/3287271/download/png/512. Accessed 28 Feb. 2023.

www.iconfinder.com/icons/7229171/download/png/512. Accessed 28 Feb. 2023.

www.iconfinder.com/icons/5355692/download/png/512. Accessed 28 Feb. 2023.

FAQs

Is fintech a financial technology? ›

Fintech, a clipped compound of "financial technology", refers to firms using new technology to compete with traditional financial methods in the delivery of financial services.

What is an example of a financial technology fintech? ›

A Simple Definition of FinTech

Some examples include mobile banking, peer-to-peer payment services (e.g., Venmo, CashApp), automated portfolio managers (e.g., Wealthfront, Betterment), or trading platforms such as Robinhood.

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What is the difference between fintech and financial technology? ›

Financial technology (better known as fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. At its core, fintech is utilized to help companies, business owners, and consumers better manage their financial operations, processes, and lives.

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What does fintech mean in finance? ›

The word “fintech” is simply a combination of the words “financial” and “technology”. It describes the use of technology to deliver financial services and products to consumers. This could be in the areas of banking, insurance, investing – anything that relates to finance.

Is fintech a good career? ›

Why start a career in fintech? One of the most attractive features of the fintech sector involves its current market momentum. Recent data indicates that the industry should enjoy a compound annual growth rate (CAGR) of 26.2% between 2022 and 2030, making it perhaps the fastest growing sector within finance.

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Are banks using fintech? ›

These days, with all sorts of ways to navigate the digital space, banks and financial institutions are making wealth access easier than ever with financial technology, or fintech.

How do fintechs make money? ›

Fintechs make most of their money through subscriptions, third parties and advertising. Since most fintech companies are at earlier stages in the business, many of them focus on growth rather than being profitable.

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Is PayPal fintech? ›

Fintech stock PayPal (PYPL) ticks higher before Wednesday's market close, following positive comments from their Chief Financial Officer Jamie Miller. The CFO stated that the company's transaction margin growth is performing well. Block (SQ) shares are also outperforming in the fintech sector.

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Is fintech high paying? ›

As of Apr 20, 2024, the average annual pay for a Fintech in the United States is $123,495 a year. Just in case you need a simple salary calculator, that works out to be approximately $59.37 an hour.

Is Venmo a fintech company? ›

The app has been around since 2012 and was eventually acquired by FinTech giant Paypal. Venmo has made paying back friends, splitting checks, and sending money to family simple in a world where people seldom use cash anymore. There are several different ways Venmo makes money from its app and services.

Is fintech good or bad? ›

Fintech has an employee rating of 3.7 out of 5 stars, based on 127 company reviews on Glassdoor which indicates that most employees have a good working experience there. The Fintech employee rating is in line with the average (within 1 standard deviation) for employers within the Finance industry (3.7 stars).

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How much do you earn in fintech? ›

The average fintech salary in the United Kingdom is £62,500 per year or £32.05 per hour. Entry level positions start at £45,000 per year while most experienced workers make up to £82,917 per year.

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What is fintech in real life? ›

Fintechs are companies that rely primarily on technology and cloud services—and less so on physical locations—to provide financial services to customers.

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What category does fintech fall under? ›

Fintech is a portmanteau of the words “financial” and “technology”. It refers to any app, software, or technology that allows people or businesses to digitally access, manage, or gain insights into their finances or make financial transactions.

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Is fintech the same as financial innovation? ›

Financial Innovation is therefore a wide definition of change in the finance industry, while FinTech is a form of financial innovation focused on technology, with the potential to disrupt the existing financial framework.

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What is classified as fintech? ›

FinTech is a specialized type of financial technology that uses cutting-edge innovations in applications, services, and processes to expand, enhance, automate, and scale the delivery of financial products and services.

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Is fintech a financial innovation? ›

Combining the words 'financial' and 'technology', fintech is technology-enabled financial innovation, which is changing the way financial institutions provide – and consumers and businesses use – financial services.

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