From shopping to socializing, advancements in technology have changed the way that we live our lives.
One of the sectors where technological advancements have made the biggest difference is in the financial services industry. In this post, we’ll discuss financial technology (known as FinTech), explaining why it’s on the rise.
What is FinTech?
FinTech companies such as Excel Capital Management use computer programs, software and other forms of technology to support or enable financial services. This includes everything from apps for current accounts and mobile banking to online payments and even smartphone payments such as Apple Pay.
Generally speaking, FinTech companies tend to be small start-up businesses who are looking to disrupt the current financial system. However, global corporations have now realised the importance of software solutions and have turned to FinTech to improve their offering. Due to the popularity of the industry, Statista has estimated that the FinTech industry is currently worth around $43 billion. On a country level, we have also seen large investment spikes. In Turkey, for example, FinTech investments have risen from $4.6 million in 2012 to $29 million in 2016.
Advantages of FinTech
One of the main advantages of FinTech is that disruptions caused by start-up companies level the financial playing field for everyone.
For example, whereas fields like investment were once only for the wealthy, the growth of online trading platforms has meant that investment opportunities are now available to the masses. This means that individuals can trade everything from foreign exchange to commodities without even leaving the house. Long gone are the days when you’d need to employ an asset manager to do it for you.
Likewise, it has made it simpler for underwriters to assess risks, which has made it easier for more people to access personal or business loans. The same is true for those looking to open current accounts and anyone looking for savings.
As well as levelling the playing field and improving the number of products available, FinTech has also allowed financial services such as banking to become more accessible. Now, payments can be made, balances can be checked and direct debits can be set up straight from our mobile phones. This has made the bricks and mortar of bank buildings largely redundant, with over 2,000 bank branches closed in America in 2017 alone.
The Future of FinTech
Although many FinTech advancements have been hugely successful over the past decade, there are so many additional ways that technology can help to improve the finance industry. One of these is blockchain (a decentralized form of record keeping), which is the technology behind cryptocurrencies such as bitcoin.
The blockchain is a digital ledger of cryptocurrency transactions and has the ability to completely revolutionize the way we conduct transactions, from banking transactions to the transfer of property. Blockchain technology itself still has much to prove but, should it be accepted by banks and governments, it could completely change the way we conduct transactions, saving money, providing greater security and improving transaction times.
To conclude, from mobile banking apps to trading platforms and everything in between, FinTech has led to a number of technological advancements in the finance world. With further advancements to come, particularly in relation to blockchain technology, it will be interesting to see how FinTech develops further over the next decade.