To be a leader in a market every thriving business needs FinTech. The term is an acronym made of the words ‘finance’ and ‘technology’. It refers to any business that uses technology to automate and improve financial processes.
The question is why do we need financial technology to be successful in the market? People didn’t have any technology in the past and still ran successful businesses, right?
The most simple answer is that with technology development almost every type of business has a chance to develop and improve its services and products. With the automatization of finance processes, we’re able to save a bunch of money and time. The saved money we can re-invest to improve our business and beat the competition on a market.
These days, both modern and traditional businesses are embracing technology in different finance areas to attract more clients.
Lending
The process of borrowing money was never easier thanks to financial technology. You can apply for a loan using only your mobile device. Lending companies all over the world are using machine learning technologies and algorithms to assess creditworthiness.
A Federal Reserve Bank of New York states that FinTech lenders are processing applications at least 20 times faster than traditional banks and other lenders. You might think it affects the quality of loan placement and increases the probability of default, but no, technology gives them nothing but improvement and a better overview of the business.
Banking
Banks are modern rulers of the world. They control the majority of financial transactions. So it’s not surprising that banks are leading movers of technological development.
Banks are using FinTech features to develop credit quality ratings for each client. They are using data warehouse models to collect the big data, arrange it and create sensible reports.
With proper FinTech setup, they are getting real-time data. It’s not a secret that banks are sharing the data between themselves. So, when the client enters the bank and applies for a loan, or he simply wants to make a transaction, a bank can get real-time information about the credit quality of the client. They get the information where the client is employed, how much he earns, does he have any mortgages, etc. Based on the information from the data warehouse, a bank officer immediately gets a credit rating of a client, based on certain criteria.
Cryptocurrency
At the moment, there’s no more intriguing business in the world than cryptocurrency. For some people, it’s the future of the world economy, for others it’s fraud and a financial balloon and it’s a matter of time when it’s gonna blow.
The cryptocurrency market cap is worth more than $2 trillion and no one knows what will happen in the forthcoming days. The whole cryptocurrency system is based on the FinTech blockchain system. There are a few main cryptocurrency features that give them an advantage on traditional financial systems:
- Speed. Cryptocurrency transactions are made in real-time.
- Accessibility. You can access it, trade it, and mine it all over the world. All you need is internet access.
- Discretion. Unlike bank accounts, cryptocurrency wallets are 100% anonymous and no one can access them.
- Elimination of banking fees. Trading with cryptocurrencies means there are no banking fees and minimum balance maintenance fees.
Savings
According to Forbes, the Covid-19 pandemic triggered Americans to save money at record rates. Yet, the interests in saving are lower than ever, almost close to zero.
FinTech tools are trying to help customers to get the highest possible yield with minimum risk. Saving institutions are using tools to provide a guaranteed interest of at least 3%. They are providing the ultimate customer service. All the customer needs is to trust them and give them his money.
Payments
Nowadays the payment is easier than ever. If you tell some Gen Z, or Gen Alpha kid that you have to stay in the lane to pay a utility bill or to send a postcard, he would look at you doubtfully. Today, almost every institution in the world supports online payment systems.
The covid-19 pandemic affected customer behavior and increased online trading by at least 50%. Now it’s easy to buy anything you want with a credit card or a wallet within a second.
Interesting Related Article: “6 Ways Fintech Is Helping Small Business“
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