Fintech is a portmanteau for "monetary technology." It’s a catch-all term for any technology that’s used to augment, streamline, digitize or disrupt traditional financial services.
Fintech refers to software, algorithms and applications for each pc- and mobile-based tools. In some cases, it contains hardware, too—like smart, linked piggy banks or virtual reality (VR) trading platforms. Fintech platforms enable run-of-the-mill tasks like depositing checks, moving cash among accounts, paying bills or applying for monetary aid. Additionally they encompass technically intricate concepts like peer-to-peer lending or crypto exchanges.
The annual Forbes Fintech 50 compiles a number of the scorchingtest platforms on the market worth noting. The 2020 list included corporations like Chime, a digital-only bank, and Affirm, a resource for fast, fixed-rate, level-of-sale loans. Stripe also emerged as an investor darling this year, with a $1 billion vote of confidence in the type of funding from Sequoia Capital, General Catalyst and Visa, amongst others.
Fintech branches off into a number of more granular industries: wealthtech (apps like Wealthsimple, a web based investment management service), investtech (like Acorns, which lets users spherical purchases up to the nearest dollar, investing the change in a diversified portfolio) and insurtech (reminiscent of Subsequent Insurance, a mobile-first carrier). It has use cases across practically every business, geographical market and business model.
Banks use fintech for both back-end processes—behind-the-scenes monitoring of account activity, for example—and consumer-facing solutions, like the app you use for checking your balance. Individuals use fintech for everything from tax calculations to dabbling within the markets, with no prior investing expertise necessary.
Businesses depend on fintech for payments processing, e-commerce transactions, accounting and, more lately, seeking assistance with government assistance programs like the Payroll Protection Program (PPP). In the wake of the COVID-19 pandemic, more and more businesses are turning to fintech to enable features like contactless payments or different tech-fueled transactions.
How Has Fintech Developed?
Just because fintech is buzzy doesn’t mean it’s brand new. Though the phrase was only added to the Merriam-Webster dictionary in 2018, the idea dates back decades. ATMs, for example, had been at one time on the very slicing edge of fintech innovation, as have been signature-verifying technologies first used by banks in the 1860s.
In recent years, fintech has morphed from being related with scrappy startups to becoming a major side of established and legacy monetary institutions. Whereas the term as soon as largely implied Silicon Valley-based disruptors shaking up the big banks, as we speak, many companies have teamed up with the incumbents they purportedly sought to usurp.
Consequently, some of the world’s most widely recognized institutions now have their own fintech nest egg under their wing. JP Morgan invested $25 million in fintech startups in 2019. Capital One has created fintech-infused "banking cafés" to usher younger, digitally savvy clients within the door. And, in 2016, Citi launched the Citi Developer Hub to invite third-party programmers to test and share feedback on application programming interfaces (APIs).
Fintech has been proving its worth in the face of the coronavirus pandemic, at the same time as some of its iterations suffer. For example, regardless that the Capital One cafés are closed briefly, banks and credit unions across the U.S. have been able to transact—and provide COVID-19 help and companies—digitally. Longer-than-traditional wait times for telephone service also could be averted by logging on or accessing a bank or credit union’s mobile app.
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