FinTech is a global trend where technological innovations help finance to be more democratic and efficient. Some large pioneering companies in the FinTech world are PayPal, Bitcoin, Forex, among others. Bangladesh is not behind as it has an amazing FinTech revolution, NAGAD, by Tanvir Mishuk.
So why do FinTechs turn out to be important today? Because our world today is digital, and finance is no exception. Everything is now easy and faster with digitalization, and so is finance.
Therefore, if you are interested to know the reasons why FinTech is important, Ride with us. But before that, we would like to tell you a little about what FinTech is.
What is FinTech?
FinTech is the contraction of two words, “financial” and “technology.” This term is used to describe technologies that seek to improve and automate financial services provision and use.
The goal of FinTech start-ups is to help businesses or consumers better manage their financial operations. For this, they can use specialized software and algorithms. These digital solutions are used on computers and increasingly on smartphones.
Originally, the term FinTech applied to technologies used in the financial sector and banking. Since then, massive democratization of stock market investments for individuals has happened in the early 2000s. And the world of finance has seen the arrival of a large number of new digital players. From there, FinTech companies have become more consumer-oriented.
FinTech is now made up of a wide range of services for several sectors and industries, including education, crowdfunding, retail banking, insurance, fundraising, and investment management. You can also utilize Fintech to develop and use cryptocurrencies such as Bitcoin, which today has several billion dollars in capitalization.
FinTech also describes various financial activities, such as:
- Transfers with your smartphone,
- Applying for credit without going through a bank,
- Raising funds for setting up a business or
- Managing your stock market investments online.
According to the FinTech Adoption Index (established in 2017 by Ernst & Young), a third of consumers use at least two FinTech services. The services are related to their daily life, such as managing their bank account or mobile payments.
6 Reasons Why FinTech Is Important
FinTech has several advantages compared to traditional financial services. It is beneficial for any company, regardless of what type of company they are.
1. They facilitate access to the digital financial world
Anyone with access to the internet or smartphone is able to enjoy these services. They don’t even need to go to the bank and from any location.
2. They provide more specialized services
Their services are focused on customer needs, flexible and agile, serving customer segments or niches. Today, these services are neglected or excluded by traditional banking due to a lack of capabilities and/or flexibility.
3. They save money
They reduce costs; provide prices according to supply and demand. It is possible to skim the customer’s payment possibilities and make fixed investments in technology profitable.
As it is technology-intensive, the reduction of personnel, service, and rental expenses, among others, results in higher margins. And they transfer the benefits to the client.
4. They increase the speed of the service
By being mostly a single product, they focus on a specific service, which allows specialization and efficiency in the business model.
5. They educate and advise the client
Being closer to them, there is the possibility of creating a better relationship and loyalty over time. In countries of our region, financial education continues to be a challenge. And we believe that FinFech companies are able to cover gaps in financial inclusion as well.
6. They reignite innovation and competition throughout the financial industry
It is evident that financial services ten years ago and those of today are clearly different. This disruptive wave has made some institutions turn their attention to start-ups that with few resources. A lot of ingenuity has managed to solve problems that they could not solve (or not they knew they existed).
Thanks to FinTech, customer well-being levels are increasing, making the market work from many angles. The real dimensions of this type of technological undertaking will only show in 10 years. By this time, the native generations of the internet will maximize its use or invent a new order.
More and more companies are offering innovative and attractive services based on FinTech. This growth justifies the reasons why FinTech is important.