What is Fintech and why are many organizations rapidly adopting it?
Fintech in its basic terms is an intrinsic merger of financial services and technology which have made the former, in all its versions, user-friendly to the customer. It facilitates online payments, secures money transfers, manages investments, and even offers access to loans. However, Fintech performs these much faster and more efficiently than usual financial institutions. It can cut through red tape, and make transactions happen in a matter of hours instead of months. It can open up opportunities to previously untapped markets.
Fintech is also created by a lot of startups that provide solutions for businesses that do not have the luxury of time to wait for months just to process their payments, money transfers, loans, etc. Because technology performs the functions often done by a human workforce, the services can also cost less.
Just to give a few examples:
Paypal is one pioneer of Fintech. It offered businesses and individuals a way to send and receive payment online, offering various options such as cash and credit cards. Strong security systems made hacking virtually impossible and engendered trust for the process. It also paved the way for small businesses to sell their goods directly to the international market.
Another example is TransferWire which enables the sending and receipt of cash to virtually any location in the world. It is similar to the traditional bank remittances but has a shorter process time and is less expensive.
Kickstarter helps entrepreneurs find capital without subjecting them to the stringent cumbersome procedures usually experienced in banks or venture capital firms.
Wealth management Fintech solutions like Wealthfront empower business heads and their money handlers to organize their financial management processes in one platform.
Crowdfunding allows peer-to-peer lending for companies, especially new enterprises, that need a sustaining flow of cash. An online platform presents the idea, cause, vision, or company that the enterprise wants to build. Interested parties, even the average working man or woman, can buy a share for $20 to $100 a share.
Fintech startups pose a serious challenge to what is now regarded as the old guard. This new burgeoning ecosystem can stand to make $4.7 trillion in annual revenue and $470 billion in profit, according to an analysis by Goldman Sachs.
It is a misconception, however, to think that the old venerable banking institutions that funded industries and provided a safe haven for individuals will soon be replaced. Some, which recognize the flexibility and accessibility that Fintech startups offer, might want to partner with them. The bigger conglomerates might even acquire Fintech companies to grow their product line and offer customers key services that they do not have and would rather not build on their own.
What Fintech offers companies is a choice to find financial resources and services that can serve their business objectives at the fastest possible time, in the most efficient way, and with little expenditures as possible.