FinTech Academy: What Is FinTech? A Whirlwind Tour
There is no doubt about it that we are in the thick of the 4th industrial revolution. The times we are living in, the way we live and work, are as different from the recent past and as disruptive as the move from cottage industries to factory production in the 1800s.
Technology is now merged with our daily lives, from how we consume our news, how we monitor our health or receive treatment, even how we find a mate, in many cases.
It is no surprise then that technology should affect how we manage our finances, and interact with financial institutions, or shop for and receive financial products.
FinTech is short for financial technology. Let’s take a look at the popularity of the word in recent years.
The graph below shows relative volumes of searches on Google for the word “fintech” worldwide since 2004. While there were some mentions of the subject across the Internet, it only really took off in 2015, and has climbed steadily since then.
And there is no wonder it has become so popular.
Through the convenience of technology, transferring money to a friend, colleague or business via an app is almost as easy as sending a quick text message on your phone. Before phone banking apps or even phone and internet banking, getting money from your pocket to another’s involved a number of tedious steps.
You had to go to the bank to either arrange to transfer money into someone’s account, go to the bank to pay funds directly into their account OR you could write a cheque, which the other party would have to cash…
And for the unbanked, the inaccessibility of affordable financial services meant concealing your cash in your mattress, the lining of your bra, and any number of hiding places and hoping you wouldn’t get robbed, or natural disaster wouldn’t strike your hidey holes.
Fintech products have turned these situations on their heads in a relatively short space of time.
When you transfer money today or even pay for a cup of coffee using your phone, you are participating in a revolutionary experience. You are using a form of Financial Technology, or FinTech in one of its earliest incarnations and your life is arguably much easier for it.
The word Fintech covers the use of technology across a range of financial disciplines, and FinTech companies have been springing up at an increasing rate to meet the growing need for financial technology products.
The most obvious one to people with bank accounts would be the aforementioned rise of online banking, with most major banks worldwide having produced mobile and web applications to allow users to check balances, transact, open new accounts and apply for loans, although this can be easier to do in some countries than others.
More commonly used by those in the vast number of countries where large numbers of people don’t have bank accounts – namely Africa – would be mobile wallets and payments.
Some related terms used in the fintech umbrella:
Insurtech is another term closely linked to Fintech, and stands for – you might have guessed – “Insurance technology”, and such applications might help users select and apply for insurance products, or help existing customers claim from their insurers.
Regtech (Regulatory technology) is also closely integrated with Fintech. Banks and other financial service providers have always needed to adhere to strict regulations, and this can often speed down technological advances. The aim of regtech is to help banks and FSPs to maintain compliance more efficiently and at lower costs.
Cryptocurrency is another popular subject in the Fintech sphere, and relates to digital, virtual currencies that are independent of the central banks of any nation.
The existence of such currencies relies entirely on their incorruptible nature, as nobody would invest in virtual money that can be tampered with.
This is why another term you might hear in a discussion about Fintech is “blockchain”, which relies on a system where transactions are recorded across a network of computers, instead of being stored in any central, corruptible point.
Another area of Fintech you might come across is in trade finance, where faster processing times and electronic verification are helping companies to trade more efficiently across borders while remaining compliant with customs and international trade regulations.
Crowdfunding involves the petitioning of people – typically via crowdfunding platforms, the best known one being Kickstarter – to donate small to large amounts of money towards a cause or project they’d like to support, and is only made possible with the financial technology of online payments.
So for those who may have been a little worried they were behind the times on this whole “Fintech thing” everyone is talking about, you are likely already proficient in its use, in one way or another.
And a good thing that is too. Fintech is set to give traditional financial services a run for their money, especially when it comes to user appeal. It’s fast, momentus, disruptive and here to stay.
If there is anything you’d like us to add to the list as an example of Fintech, please let us know in the comments below.
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The Mauritius Africa FinTech Hub is a fast-growing ecosystem where entrepreneurs, corporations, governments, tech experts, investors, financial service providers, universities and research institutions can collaborate to build cutting-edge solutions for the emerging African market.