When it comes to the delivery of financial services, fintech is an exciting innovation and technology that competes with more traditional methods. For that reason, it benefits the financial sector worldwide. The EY’s Fintech Adoption Index shows that more than 80 percent of customers know what fintech is while 33 percent rely on it and at least one additional service. For people unaware of what this technology is or how it benefits them, this is the perfect time to learn.
Photo Credit: https://pixabay.com/en/iphone-visa-business-buying-card-624709
As mentioned, fintech is an incredible technological innovation. Not only does it consist of Bitcoin, but also payment platforms like Ozan and peer-to-peer lending. The advantage of using Ozan is that it stores information for all accounts, thereby making it easy for people from around the globe to complete personal and business online financial transactions.
Regarding the areas common to fintech, these include:
- Algorithms that provide financial advice.
- Blockchain technology, including Ethereum and Bitcoin, as well as anything else associated with the technology.
- Cybersecurity for the financial sector.
- Digital money.
- Products from the insurance industry, such as Insurtech, that are innovative from a technological standpoint.
- Programs that ensure financial service firms stay compliant.
The great thing about fintech is that virtually anyone can use it. For example, small business owners and consumers engage with it for B2C transactions, banks for B2B purposes, mobile banking for measuring performance using analytics, and more. Because fintech continues to emerge in different forms, people are often around several practices that fall under its umbrella without knowing it. Although this has garnered tremendous attention all over the world, some countries are slower to adopt it than others.
Multiple Market Adoption
Among the different countries adopting fintech, China is in the lead, with India second and the United Kingdom third. Following are Brazil, Australia, Spain, Mexico, Germany, South Africa, and, in 10th place, the United States. According to EY, the average adoption rate is currently 33 percent.
Also stated by the EY Fintech Adoption Index is the fact that most countries have adopted fintech in one form or another. The combination of new players and services is driving the adoption of this technology, making it even more widespread. Although it entails a host of services, those at the top of the list include money transfers and payments. However, growth in the insurance sector continues to skyrocket.
Another statistic provided by EY is that for managing lives, most users prefer digital channels as opposed to older and outdated methods. The adoption rate of fintech among millennials surpassed that of generation X. On a global level, the EY predicts the adoption rate to jump to 52 percent.
Keep in mind that fintech impacts many additional products outside of money transfers, payments, and insurance. For example, it also affects investments and savings, borrowing, and even financial planning.
As for investments and savings, this includes:
- Online investment advice and management, as well as stockbroking.
- Peer-to-peer investments.
- Platforms for crowdfunding.
- Spread betting
Regarding borrowing, fintech includes:
- Borrowing short-term loans.
- Using peer-to-peer platforms.
Then for financial planning, it includes:
- Financial planning tools.
- Online platforms that help create budgets.
For an overall financial plan, each service has an essential element, thereby making every aspect of fintech critical. Take money transfers and payments as an example. Just like the Ozan app that converts several foreign currencies, fintech includes online foreign currency exchange. This technology also covers money transfers through non-banking institutions, cryptocurrency payments, and mobile phone usage for paying at a point of sale.
For the insurance industry, fintech covers things like comparison sites for finding the best rates, telematics that help reduce premiums, and health insurance prices. As the adoption rate for this technology continues to grow, all the existing services provide tremendous opportunities. However, once the adoption rate reaches 50 percent, even more exciting services will get revealed.
As fintech expands around the world, disruptive innovation has started to occur. For example, cryptocurrency significantly disrupted the market. Based on blockchain technology, which is where Bitcoin comes from, cryptocurrency has caused a lot of problems.
Because the Bitcoin is a form of digital currency, not a tangible item, it brought with it a tremendous amount of controversy. Even so, people all over the world are investing in Bitcoin, considering its widely used blockchain and security.
Fintech can even disrupt itself. An excellent example is a tech firm called Regtech. This firm assists the financial sector, ensuring that companies remain compliant. Currently, Regtech is trying to digitize the rules for money laundering in an attempt to reduce criminal activity.
This firm is also working on processes for customer verification. That way, financial institutions can efficiently identify customers, thereby reducing or eliminating acts of fraud. With fintech leading the way, Regtech and companies like it can devise solutions that better protect consumers. It comes down to understanding and getting involved with artificial intelligence and machine learning.
Open banking, which allows third parties to use bank data for building applications and services, is yet another disruptor. People that support this type of banking claim that it gives app developers access to bank data, so they can create applications that let customers make better financial decisions, thereby putting them in better control of their money.
With incredible advances in technology, it is hard to understand why some parts of the world have no access to fintech. For that reason, many fintech companies are developing products that specifically target areas that desperately need assistance in the way of financial services. Especially for impoverished regions, fintech would give people a fighting chance to compete financially with developed countries around the globe.
Something important to note is that helping the under- and unbanked does not just impact third-world countries. According to the FDIC, roughly 10 million people in the United States are in the same boat, meaning they are either underbanked or unbanked. The good news is that fintech technology can help. Digital wallets, something that anyone with any income can get, are proof that fintech has already started to have a positive effect.