‘Fintech’ a term which means ‘financial technology, is being used vastly and globally to express the development of the financial market with the help of technology. When financial transactions, loaning, debiting, investment, or any type of business is done technologically, it is called Fintech.
The term “financial technology,” is used to refer to cutting-edge technology that aims to enhance and automate the provision of financial services. Specialized software and algorithms are run on computers and smartphones. Fintech is used to help businesses, company owners, and individuals to manage their financial operations, processes, and lives in a better way.
As the fintech sector has expanded, so have worries about cybersecurity. Fintech infrastructure has become more vulnerable and a target for cybercriminals because of the enormous rise of fintech businesses and marketplaces on a global scale. Fortunately, technology is always improving to reduce current fraud risks and neutralize emerging threats.
Origin of the Term ‘Fintech’
The term “financial technology,” or fintech, is a blend of both. The word “fintech,” which first appeared in the 21st century, was initially used to refer to the technology used in the back-end systems of well-established financial institutions. However, since that time, there has been a change to more consumer-focused services and correspondingly, a more consumer-focused definition.
The Fintech Companies which apply technology in financial aspects are known as Fintech Companies and the services that they provide are called Fintech Services. They use many different types of Software and Applications to make this financial technology costumers friendly.
Before the advent of Fintech, customers would rely on traditional banking. But it was not new for us. It was around using some other form Virtually. As we all know bank services are necessary. Banks can never lose their existence. Only they changed their form and their way of working.
Benefits of Fintech
In the beginning, banks started using financial technology for investing their money. All their transaction work depended upon technology. Initially, technology played a limited role in the field of financial services provided by banks and financial institutions.
Financial service organizations previously provided a range of services under a single roof. The breadth of these services included everything from conventional banking operations to mortgage and trading services.
In its simplest form, fintech separates these services into standalone offerings. Fintech organizations can operate more efficiently and lower transaction costs by combining technology and simplified products.
But with the lapses of time, the Fintech companies developed leaps and bounds surprisingly. Financial services are being used in an emerging market where fintech companies are creating and claiming new segments in the existing global financial market.
They are trying to cater to an underserved customer base, by improving gradually the quality of financial products.
CGAP is aiming to bring clarity to the field with a focus on what matters for the poor to assist funders, providers, and regulators understand how fintech is growing and find new ideas.
The research has shown that, at the market level, technology-enabled disruptors are escalating competition for mass market consumers while dismantling vertically integrated value chains in the financial sector, potentially having significant ramifications for financial institutions and underserved consumers.
At the level of individual financial services, we observe a variety of new business models emerging among fintech, digital banks, and platforms that allow challengers and incumbents alike to put practical, approachable, less expensive solutions into the hands of underprivileged customers so they can use them to improve their lives.
This is true that Fintech is improving the lives of users but at the same time, they are disrupting the services in an emerging market. The banking industry which was in full swing was widely affected by Fintech Companies.
Online banking has changed the scenario. These fintech companies assure the customers of efficiency by using online strategies. The use of fintech companies in the banking sector started in 2008 when after the global recession employees lost their jobs.
They made a team with IT professionals and started creating Fintech Start-ups. As the trust in the traditional bank was shaken due to the economic crisis, the customers were excited to save and manage their money. Short-term borrowing became simple and easy with full efficiency.
- Customers can access loans in a very short period. Peer-to-Peer (P2P) lending became possible within no time.
- With the inclusion of technology in finance, banks had extensive access to consumer financial information.
- Banks were undoubtedly trying to adapt to the changing consumer expectations. Even after making so many efforts banking is still being disrupted by digital technology, new regulations, and increased competition.
Gradually Fintech or Financial Technology is becoming disruptive technology. Paytm, MobiKwik, GooglePay, and Oxigenwallets are some of the Fintech Companies which provide applications that are easily accessible on smartphones anytime and anywhere in comparison to banks.
There are a few main points to be considered about disruption by fintech in an emerging market.
- This disruption has brought some negative results despite making many positive effects.
- The process of disruption by fintech breaks or interrupts the normal course or continuation of many banking or marketing activities. This is true that Fintech is improving the lives of users but at the same time, they are disrupting the services in an emerging market.
- The negative effect of Fintech services is that they are proving to be a threat to the banking industry.
- The banks are forced to adopt the new technology or they have the risk to lose their customers.
- The metallurgical advancement which introduces coins as currency is also facing threat.
- The printing press that is engaged in printing paper money must be facing challenges.
The ATMs are losing charm because of less access to cash.
Tech firms are undoubtedly entering the banking industry directly providing different services. The positive results are taking the global market ahead with many choices, easy access, empowering the consumers, and providing incentives to change service providers. Fintech is shaping the future of the bank.