You may have used fintech before, but you might not know what exactly it is. According to Investopedia, fintech is short for “financial technology” referring to the integration of financial services companies with technology with the goal of improving delivery and use to consumers.

 

So how could I have used fintech without knowing what it is? Anyone who has used technology to manage their finances has used fintech without knowing it. Fintech is utilized in technology features such as checking your bank account balance, transferring money electronically, and more.

 

Fintech is a multi-billion-dollar industry that is less common as it is relatively new with some programs still in developmental stages. Fintech might not be too popular now but is changing economies around the world.

 

Fintech consists of a large range of business models, products, and technologies that contribute to the evolution of the financial services industry. Fintech is used in various forms including cashless payments, crowd-funding platforms, virtual currencies, robot-advisors (predicts and estimates how the portfolio balance would result depending on strategies), and more.

 

Fintech might seem to be working with the banking/finance industry but is in fact changing how people borrow and pay money that has already garnered investors. A 2018 finance report by Accenture Research/CB Insights indicates global investments using fintech have grown to nearly $100 billion since 2010 and are only getting more prevalent with time.

 

Fintech has shown impressive growth rates with a surge of 18% in 2017 alone. This increase is mostly due to startup companies focusing on lending and payment technologies that received a majority of fintech funds. Startup companies aren’t the only ones utilizing Fintech, more established companies such as Alibaba (Alipay) and Apple (Apple Pay) are utilizing fintech as more consumers are relying on fintech for most of their finances.

 

According to the Fintech Adoption Index, one out three people across 20 major economies report using at least two fintech services in the last six months. The leading countries using fintech are India and China with more than half of the consumers uses services such as borrowing, money transfers, insurance, and financial planning. Fintech is also helping people around the world who don’t have access to traditional banking services.

 

A study indicates that more than 1.7 billion people worldwide are without bank accounts but with the use of fintech, more people have access to banking by simply using their phones. One successful fintech program used in Kenya is M-Pesa that is used by 96% of the country’s population and this program has helped life 2% of Kenyan households out of extreme poverty, according to a study by MIT.

 

Fintech is becoming more popular with wealth managers competing with robo-advisors that are automated financial planning services. Robo-advisors utilize high-tech algorithms making services available 24/7 and tend to be more affordable than traditional asset managers with some robo-advisors managing billions of dollars.

 

Like any financial institution, fintech comes with some risk and regulators are working to keep up with the fast pace of innovation. One of the biggest issues in fintech is maintaining data privacy as more financial services go digital, cyber-attacks become a bigger risk.

 

This risk is becoming more prevalent as more businesses go digital. Though there are some risks with using fintech, more business opportunities grow and can be adapted with more companies.