LEARN ABOUT THE WORLD OF INVESTMENT BANKING
FinTech
The use of technology and innovation to provide and improve financial services
What is it?
The word itself is a mash-up of the words, "financial" and "technology". The term encompasses a wide range of activities focussed on improving financial services for companies and consumers. Some of these activities are listed below.
Payments
Some FinTech companies offer solutions for online payments, money transfers, and digital wallets. Some examples are PayPal, Square, and Venmo.
Lending
Some platforms allow borrowing and lending between individuals and companies without traditional financial intermediaries, such as LendingClub and Prosper.
Online Banking
A major market that has taken over is online banking which includes checking and savings accounts, loans, and investment options. Banks like Ally Bank and FinTech companies like Chime offer such services.
Digital Currencies
It has also played a major role in the rise of digital currencies and blockchain technology.
Advising
Investing is made more accessible with the development of AI and data analysis which can provide automated investing advice. This is a small industry with large potential growth, companies that offer these robo-advisory services include Betterment and Wealthfront.
Crowdfunding
It has led to the development of crowdfunding platforms that raise capital, such as Kickstarter.
Data analysis
Fintech firms use data analytics to provide insights into personal finance, investment, and budgeting. Examples include Mint and Personal Capital.
Future of FinTech
Most analysts in the industry predict FinTech to be key to the future of finance and expect it to transform the industry. This would include expansion of the fields it currently operates as mentioned above. Additionally, many companies are adopting digital services such as Goldman Sachs who aim to make around $750 million from its FinTech department by 2024. Through this progression to a more digitalised world of banking it also brings side benefits to the technological industry. For example, with an increasing number of online transactions taking place, FinTech companies have had to develop digital verification systems to improve their security. This technology can be easily adapted into other industries as well, making it multi-faceted. This brings about an overall improvement in the digital space.
A big player in the future of FinTech is machine learning and AI. With its ability to analyse vast amounts of data and observe complex patterns that humans would struggle to notice, machine learning enables more accurate credit scoring, risk assessment, and fraud detection. As well as this it can use predictive analysis to improve investment strategies with more accurate and data-driven advice for investors. Chatbots and virtual assistants powered by machine learning can improve customer service and streamline inquiries whilst also cutting costs for firms. Additionally, machine learning can optimise financial operations, from automating routine tasks to predicting market trends. Since the very nature of AI is to evolve and adapt, it will prove to be very useful in the financial technology realm which is very fast-paced.