Ever since the inception of the financial services industry, FinTech has been around. However, in recent years, more and more disruptive businesses have started to upend the traditional financial sector. Modern FinTech solutions are able to massively speed up tired old processes and, most importantly, reduce the costs involved for everyone who is a part of a transaction.
FinTech is just the shortened version of the term "financial technology". It refers to any technology that is implemented within the financial sector. FinTech software is apparent in numerous aspects of our lives and most of us rely on it each and every day.
PayPal is an example of FinTech that has already drastically altered the traditional banking sector by allowing individuals to handle their finances online. PayPal quickly revolutionised the banking sector and caused banks to rethink the way they allow their customers to access their services.
As mentioned, technology has long been applied to the banking industry, but the way in which it is packaged and used has changed drastically. It was once used more for the back-end of things, allowing banks to process and handle their data more effectively. But modern FinTech solutions are more end-to-end.
This means that the FinTech software itself is packaged in such a way that consumers get direct access to the new technology. Perhaps one of the most current examples of end-to-end is Bitcoin. Bitcoin, which is supported by blockchain, allows everyday consumers to perform complex financial transactions with other people anywhere in the world.
Better yet, they can do it without the need for a financial intermediary. Blockchain is set to massively disrupt the traditional banking sector as it offers a safer, faster, and more transparent way for businesses and consumers to conduct financial transactions.
It is hardly a secret that consumers now expect to be able to go about their days in a faster and more efficient way. FinTech has allowed people to carry out once slow and mundane tasks with ever-increasing efficiency. This includes:
- Shopping. No longer do you need to visit a store to purchase anything. eCommerce giants like Amazon have made it ten times faster to perform all shopping online without you needing to leave the house and handle physical money.
- Insurance. FinTech software has made purchasing insurance faster than ever. Businesses can now hold and analyse vast amounts of data in a matter of seconds and help tailor an insurance product to the needs of the individual.
- Lending. Brokering lending agreements is something that used to take a long period to process, but this can now be down within hours or even minutes. Lenders can store and calculate a large variety of customer metrics to make informed risk-reward decisions as to what loans they will issue and how they will see their returns.
Just a few decades ago, it would have been ludicrous to suggest that a new and unestablished business could enter a market such as the financial sector and actually compete. Well, start-ups are responsible for much of the drastic change we have witnessed in recent years. At the turn of the 21st century, PayPal sold for over $1 billion after having only been trading for 3 years. This started a wave of new and innovative FinTech solutions to be presented to consumers.
The rapid development of FinTech software shows no signs of slowing down, and it is exciting to see what will be available to us within the next 10 years.