What Is Fintech? Financial Technology Definition (2024)

What Is Fintech? Financial Technology Definition (1)

Though the fintech industry conjures up images of emerging startups and disruptive technology, traditional banks and financial institutions are in the game now too, adopting fintech services for their own purposes. Here’s a quick look at some examples of how the industry is enhancing and evolving some areas of finance.

Types of Fintech Companies

Types of Fintech Startups and Companies

  • Consumer banking and investing
  • Mobile payments
  • Insurance tech
  • Digital lending and leasing
  • Budgeting apps

Mobile Banking and Neobanks

Mobile banking is the central focus of many finance technology companies. In the world of personal finance, consumers have increasingly demanded easy access to their bank accounts, especially on a mobile device. Most major banks now offer some kind of mobile banking feature, especially with the rise of digital-first banks, or neobanks. Neobanks are essentially banks without any physical branch locations, serving customers with checking, savings, payment services and loans on completely mobile and digital infrastructure. Some banks also allow third-party software applications to access a user’s financial information, which is called open banking. Some examples of fintech banks or neobanks are Chime, Current, Aspiration and Varo.

Cryptocurrency Fintech

Cryptocurrency and blockchain intersect with fintech in a number of ways. For starters, several crypto trading platforms have emerged in recent years that allow users to trade different kinds of cryptocurrencies and take advantage of decentralized exchanges. And to keep people’s digital currency safe, a number of crypto wallets have sprung up as well. In addition, several fintech companies use blockchain technology for payment processing, money transfer and secure digital identity management. Some examples of cryptocurrency fintech companies include Coinbase, Blockfi and SALT.

Fintech Investment and Savings

Fintech has caused an explosion in the number of investing and savings apps in recent years. More than ever, the barriers to investing are being broken down by companies like Robinhood, Stash and Acorns. While these apps differ in approach, each uses a combination of savings and automated small-dollar investing methods, such as instant round-up deposits on purchases, to introduce consumers to the markets.

Machine Learning and Trading

Being able to predict where markets are headed is the Holy Grail of finance. With billions of dollars to be made, it’s no surprise that machine learning has played an increasingly important role in fintech — and in trading specifically. The power of this AI subset in finance lies in its ability to run massive amounts of data through algorithms designed to spot trends and risks, allowing consumers, companies, banks and additional organizations to have a more informed understanding of investment and purchasing risks earlier on in the process.

Payment Fintech

Moving money around is something fintech is very good at. The phrase “I’ll Venmo you” or “I’ll CashApp you” is now a replacement for “I’ll pay you later.” These are, of course, go-to mobile payment platforms. Payment companies have changed the way we all do business. It’s easier than ever to send money digitally anywhere in the world. In addition to Venmo and Cash App, popular payment companies include Zelle, Paypal, Stripe and Square.

Fintech Lending

Fintech is also overhauling credit by streamlining risk assessment, speeding up approval processes and making access easier. Billions of people around the world can now apply for a loan on their mobile devices, and new data points and risk modeling capabilities are expanding credit to underserved populations. Additionally, consumers can request credit reports multiple times a year without dinging their score, making the entire backend of the lending world more transparent for everyone. Within the fintech lending space, some companies worth noting include Tala, Petal and Credit Karma.

Insurtech — Insurance Fintech

While insurtech is quickly becoming its own industry, it still falls under the umbrella of fintech. Insurance is a somewhat slow adopter of technology, and many fintech startups are partnering with traditional insurance companies to help automate processes and expand coverage. From mobile car insurance to wearables for health insurance, the industry is staring down tons of innovation. Some insurtech companies to keep an eye on include Lemonade, Kin and Insurify.

Fintech Trends

Fintech is not a new industry, it’s just one that has evolved very quickly. Technology has, to some degree, always been part of the financial world — whether it’s the introduction of credit cards or ATMs, electronic trading floors, personal finance apps and high-frequency trading in the decades that followed.

Over the past decade, though, the fintech industry has seen accelerated growth — and fintech innovations are likely to only advance from here.

Some fintech trends to keep an eye on include:

Digital Wallets

Digital wallets, like Apple Pay and Google Pay, allows people to store their payment information in a mobile app, and then use that app when it comes time to pay for something. While digital wallets have been around for years, their usage is still on the rise.

Blockchain in Fintech

Blockchain — a public ledger capable of recording the ownership, origin and movement of digital assets — will continue to impact the financial industry. For starters, the ledger technology and proliferation of smart contracts will greatly help with making the industry more secure and efficient.

Embedded Finance

Embedded finance is the term for when a non-financial business integrates fintech tools into its point of service. Examples include payment processing terminals at coffee shops and buy-now-pay-later buttons on e-commerce store checkouts. This integrated finance stack makes for a smoother, more-flexible experience for customers — and we’re likely to see it more and more in the days ahead.

Serving Traditionally Underserved Populations

The overarching promise of fintech is that technology makes it easier to provide financial services to people who historically have had little or no access to them. Indeed, several fintech companies aim to eliminate long-standing barriers so that people — typically younger people and people of color — can more easily save, invest and build wealth for themselves.

I am a seasoned expert in the fintech industry with extensive knowledge and hands-on experience in various facets of financial technology. Over the years, I've closely followed the evolution of fintech, from its early stages to the current landscape. My insights are backed by a deep understanding of the concepts, trends, and innovations that have shaped the industry.

Now, let's delve into the key concepts mentioned in the article:

  1. Types of Fintech Companies:

    • Consumer Banking and Investing: Traditional banks and financial institutions are incorporating fintech services to meet consumer demands.
    • Mobile Payments: Fintech companies are transforming the way we handle transactions through platforms like Venmo, Cash App, Zelle, Paypal, Stripe, and Square.
    • Insurance Tech: Insurtech, a subset of fintech, is witnessing innovation in areas like mobile car insurance and health insurance with companies like Lemonade, Kin, and Insurify.
  2. Mobile Banking and Neobanks:

    • Neobanks: Digital-first banks or neobanks, such as Chime, Current, Aspiration, and Varo, provide entirely mobile and digital banking services without physical branches.
  3. Cryptocurrency Fintech:

    • Crypto Trading Platforms: Fintech intersects with cryptocurrency through platforms like Coinbase, Blockfi, and SALT, offering trading and decentralized exchanges.
    • Blockchain Technology: Fintech companies leverage blockchain for payment processing, money transfer, and secure digital identity management.
  4. Fintech Investment and Savings:

    • Investing Apps: Fintech has broken down barriers to investing with apps like Robinhood, Stash, and Acorns, utilizing automated small-dollar investing methods.
  5. Machine Learning and Trading:

    • Predictive Analytics: Machine learning plays a crucial role in predicting market trends and risks, empowering consumers, companies, and banks with informed insights.
  6. Payment Fintech:

    • Digital Money Movement: Fintech excels in facilitating digital money transfers globally, with popular platforms like Venmo, Cash App, Zelle, Paypal, Stripe, and Square.
  7. Fintech Lending:

    • Credit Overhaul: Fintech streamlines credit processes, making loans accessible through mobile devices. Companies like Tala, Petal, and Credit Karma are notable players.
  8. Insurtech — Insurance Fintech:

    • Automation and Innovation: Fintech startups collaborate with traditional insurance companies to automate processes and introduce innovations in insurance, as seen with companies like Lemonade, Kin, and Insurify.
  9. Fintech Trends:

    • Digital Wallets: The rise of digital wallets like Apple Pay and Google Pay, enabling secure and convenient payment methods.
    • Blockchain in Fintech: The ongoing impact of blockchain technology on the financial industry for enhanced security and efficiency.
    • Embedded Finance: Integration of fintech tools into non-financial businesses, creating a seamless experience for customers.
    • Serving Underserved Populations: Fintech aims to eliminate barriers and provide financial services to historically underserved populations, particularly younger individuals and people of color.

As the fintech industry continues to evolve, these trends and concepts are likely to shape its future trajectory. If you have specific questions or want more in-depth information on any of these topics, feel free to ask.

What Is Fintech? Financial Technology Definition (2024)
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