FINTECH, as the name suggests: financial services using technology, is revolutionizing the way people are transacting, saving, borrowing, or investing. The advent of data analytics and machine learning has empowered individual customers and businesses to access financial services at the click of a button or on a mobile app. The growth in fintech is evident in the ever-increasing funding that new-age fintech companies have received. According to a KPMG report, between 2016 and 2021, global fintech funding has tripled to a total value of $210 billion in 2021. The war on Ukraine and the global recession scenario have not stopped funding in the fintech sector, which has already risen to $110 billion.
The following are some of the top ways fintech is transforming our daily lives.
1. Digitized payments
With the rapidly changing consumer trends and rise in e-commerce, much of the population is now availing of goods and services online and paying digitally using virtual cards or wallets. Fintech Apps like Venmo in the USA, PayTM in India, and AliPay in China allow for fast digital transactions, shopping discounts, and cashback to encourage consumers to pay digitally via their services.
The ease of digital payment adoption is evident from the $9.6 trillion worth of daily digital transactions as reported by JPMC report. Digital payments are safer than physical debit or credit cards, more durable than cash, and traceable.
2. Easy Lending
Traditionally banks and non-banking financial institutions lent funds to individual customers basis their credit scores, incomes, and strict behavior patterns. Because of the lack of wholesome data and manual underwriting of loans, many could not access credit from banks. Also, the manual process of lending meant higher interest rates on loans.
Fintech players like Sofi in the USA and Lufax in China have changed the lending game by using data analytics and Artificial Intelligence based underwriting loans and automation in processing and collections.
Now a large number of fintech companies can provide unsecured and secured loans at a lower rate to even individuals with a lesser credit score. A new concept of Buy Now Pay Later has arrived wherein fintech apps like Klarna provide customers with the option of paying for purchases later without paying interest.
Because of lending innovations in fintech, consumers can now afford large ticket items like a house, private college education, and an expensive car.
3. Simplified Insurance
Insurance is necessary but a boring product, and many people in developing countries are unaware of the need for insurance. However, fintech companies providing insurance services (also called insuretech companies) make insurance fun, affordable, and accessible.
Companies like Oscar and Ride in the USA and ZhongAn in China are massively transforming the lives of insurance holders. Some apps smartly underwrite policies and quote motor insurance premiums to consumers basis the number of miles and speed of the vehicle driven by the customer, thus citing lower insurance rates to responsible customers.
New-age insuretech players in India like Symbo provide sachet insurance, i.e., insurance on small-ticket purchases like a spectacle, shoe, or furniture. Some health insurance apps track a person’s health through fitness bands and provide discounts on insurance premiums. From insurance purchases and processing of documents to claim settlements, fintech players are digitizing and automating the customer journey.
4. Smart Wealth Management
Investing in stocks, bonds, or mutual funds has traditionally been left to brokers to handle with high broking charges and no real-time market insights. Fortunately, fintech players like Robinhood, Coinbase in the USA, and Zerodha in India have digitized the entire investment journey for retail investors.
Due to the automation of trading, the use of algorithms and visual graphics, and artificial intelligence, fintech apps can solve the entire wealth management journey for investors.
The apps educate the investors on intelligent wealth management, run trades at lightning speed through algorithmic trading, advise investors basis their risk appetite, and generate real-time investments and capital gains dashboards all from the comfort of your home and on a mobile app. Fintech has therefore reduced the brokerage and advisory costs for investors.
5. Support to Businesses
In addition to helping individual consumers, fintech companies are transforming businesses both large and small. Because of innovative fintech companies like Stripe in the USA and Razorpay in India, businesses can integrate their websites with payment gateway solutions to easily transact with their buyers.
Many companies are using fintech solutions to manage their taxes and accounting books. Because of expense management, fintech companies can forecast business health. Through lending and invoice discounting solutions, fintech helps businesses manage working capital needs and any immediate cash requirements.
6. Neo banking
The latest round of fintech innovations is around neo-banking. According to Forbes, Neo banking is a digital-only platform that allows consumers to transact with traditional banks without visiting the bank branch physically, saving time and money.
USA’s Revolut and Brazil’s NuBank are a few examples of fintech focussed on neo banking. They provide multiple benefits to young tech-savvy consumers involving smart savings accounts, high-limit credit cards, and easy access to unsecured personal or business loans.
Conclusion
To conclude, fintech is transforming the entire financial service journey, including saving, transacting, borrowing, and protection to investing. The future will see many traditional financial services going digital and, with the help of technology, making financial services for consumers cheaper and more accessible.
