As technology takes the world by storm, FinTech also evolved during the global financial crisis in the year 2008. FinTech is said to disrupt and reshape traditional retail greatly. It also changed financial services and systems through digital technologies.
New technology such as blockchain and cryptocurrency has now taken centre stage. FinTech is penetrating the market and monetary institutions are making their move in utilising technology to their advantage.
FinTech is an abbreviation for Financial Technology. It refers to any technology or software that is utilised to support or enable banking and financial services of an organisation.
Prof. Patrick Schueffel’s literature review of FinTech described it as services, industry, technology and a type of action such as business or services. It is also described as an emerging, innovative and enhancing service or system in facilitating financial services.
Areas of FinTech
FinTech covers major transactions involving money and payments through Digital Finance and Alternative Finance. Money and Payments is defined as the use of credit card and debit card, which the amount will be deducted from an account or amount in an electronic transaction.
Digital finance is the process of using a digital transactional platform or through retail agents and the use of devices by customers and agents e.g. smartphones to make a transaction such as e-commerce.
Alternative Finance refers to financial processes or payments that have emerged outside the traditional finance system such as crowdfunding, peer-to-peer consumer and business lending. This is done by utilising third-party capital by connecting fundraisers straight to the funders. Some examples are Gofundme, Fundly and Paypal.
Major Technological Trend
Emerging technology such as Blockchain, Cryptocurrency, Artificial Intelligence and Big Data are the supporting pillars of Fintech. Blockchain improves the security of online transactions using a new currency known as Cryptocurrency, i.e. money with no physical form.
The rising amount of Big Data is significant for Artificial Intelligence to identify, analyse and manage data for organizations. It increases a company’s or a bank’s competitive edge within the industry and the data is used to improve customer service and user experience.
Benefits of Fintech
Services that involve the process of payments and investments have been improved drastically. With the emergence of IoT, FinTech serves an even greater purpose in facilitating e-payments and online transfers.
Banks are now the provider of FinTech technology and services. Business transactions are transparent and seamless through online transactions and applications that ease the process as compared to traditional transactions.
In conjunction with the massive amount of data in the digital world, laws and regulations have been enacted to protect the user’s privacy and security e.g. enforceability, authorisation and regulatory priorities.
While this particular industry is still in its nascent stage, we can already see that financial institutions have begun to take proactive steps in incorporating technology and providing their customers with digital transactional platforms to join the evolution of FinTech. By leveraging technology, it gives purchasing power to the people and a secured transaction is now possible with just a tap of a finger.
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