FinTech (financial technology) is an umbrella word comprising software, mobile applications, and other technologies designed to automate traditional forms of finance. Many financial businesses and companies are using this technology to ensure the smooth functioning of their business.
Apart from enhancing client retention through speed and ease, FinTech provides tailored experiences to customers through big data and AI. FinTech has transformed financial institutions for millions of people across the world, changing how we pay each other, purchase stocks and other financial instruments, and obtain financial advice.
Several FinTech businesses provide distinct services to their clients. In this guide, we have covered 5 major types of FinTech to make your understanding easier and more fruitful.
What is FinTech, and How Does it Work?
FinTech is a new form of technology that aims to automate the delivery and usage of financial services. It is the combination of finance and technology at its best. FinTech, at its heart, is used to assist corporations, company owners, and consumers in better managing their financial operations and procedures.
It makes use of specialized software and algorithms that are used on computers and, increasingly, smartphones. It is a fast-expanding industry that serves the interests of both consumers and corporations in a variety of ways. FinTech offers endless advantages, ranging from mobile banking and insurance to cryptocurrency and investing apps.
FinTech simplifies financial transactions for individuals and businesses, making them more accessible and often less expensive. It can also refer to businesses and services that use artificial intelligence, big data, and encrypted blockchain technology to conduct highly secure transactions within an internal network.
In general, FinTech aims to simplify the transaction process by removing potentially superfluous procedures for all parties involved. For example, a smartphone app such as Venmo or CashApp lets you pay others at any time of day or night by sending dollars directly to their bank account
Top 5 Types of FinTech that You Can Use for Your Business
Trading and investing have improved with the adoption of FinTech. Stock trading entails purchasing and selling shares in a certain corporation. If you possess specific stocks and shares in a corporation, you own a portion of the company.
Stock traders’ principal purpose is to acquire and sell shares in various firms. They seek to benefit from short-term changes in stock prices, either for their clients or for themselves. There are two types of traders, namely individual and institutional stock traders.
Individual traders will purchase and sell through a broker or an agency. Institutional traders, on the other hand, are generally hired by investment firms. Stock traders supply liquidity to the markets and define their tactics using a variety of approaches and styles.
Peer to Peer (P2P) payments allows a person to transfer money from their bank account to another individual’s account using digital media. Payments are classified according to whether they are made to an account within or outside the bank.
P2P payments are transactions greatly used for everything, from dividing a dinner bill among friends to paying rent to the landlord. These payments enable money to be sent between two parties using their own banking accounts or credit cards via the internet or mobile app.
As more of these sorts of platforms arise, they are growing increasingly popular among individuals of all ages. Examples of P2P Payment apps include PayPal, Facebook Pay, Apple Pay, Google Pay, and so on.
Electronic commerce (eCommerce) is a business strategy that allows businesses and people to purchase and sell products and services through the Internet. Ecommerce works with computers, tablets, smartphones, and other smart devices.
Ecommerce transactions provide access to nearly every possible good and service, including books, aircraft tickets, and financial services. Ecommerce operates in four market segments, including business-to-consumer, business-to-business, consumer-to-business, and consumer-to-consumer.
Ecommerce has aided small and local firms, in particular, in gaining access to and establishing a larger market presence by providing cheaper and more effective distribution channels for their products or services.
Wealth management is an investment advisory service that integrates various financial services to meet the demands of wealthy customers. The emergence of FinTech has driven advances in the wealth management business since the 1980s, with the help of e-trading and online banking.
Wealthtech is the future of wealth management. FinTech enables wealth managers to improve their service, giving rise to an entirely new skill set known as Wealthtech.
Wealthtech, which is frequently powered by artificial intelligence (AI) and machine learning (ML), employs complicated algorithms to advise customers on the best investment or savings programs with minimum human participation.
The transfer of money, products, or services to acquire a product or service is a business payment. They are often accepted, and pre-determined values agreed upon by the seller and buyer and made available in the invoice or contract.
In business payments, there are two parties involved. A payer is the one who makes the payment, while a payee is a person who receives the payment. Payments can be made in various ways, including cash, checks, bank transfers, debit/credit cards, UPI, and so on.
Certain payment methods additionally include a transaction fee levied by the payment intermediary or facilitator, such as a bank, payment gateway, or merchant.
The above types of FinTech explain how it has expanded in different business areas. FinTech is not a new sector but has just grown too quickly. Technology has always been a part of the financial sector to some extent.
Whether it’s the advent of credit cards in the 1950s or ATMs, electronic trading floors, personal finance applications, and high-frequency trading, FinTech is everywhere.
Conclusively, the combination of technology and finance has made doing business with clients or customers much easier and more efficient. FinTech is now officially recognized as a primary participant in the business landscape, global economy, and fabric of modern society. The field is broad, fast expanding, and looks like it’s here to stay.