Consumer Reports, she is an expert in credit & debt, retirement planning, trang chủ ownership, employment issues, and insurance. She is a graduate of Bryn Mawr College (A.B., history) and has an MFA in creative nonfiction from Bennington College." data-inline-tooltip="true">Julia Kagan
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Eric is a duly licensed Independent Insurance Broker licensed in Life, Health, Property, và Casualty insurance. He has worked more than 13 years in both public và private accounting jobs và more than four years licensed as an insurance producer. His background in tax accounting has served as a solid base supporting his current book of business.

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Amanda Bellucco-Chatham is an editor, writer, và fact-checker with years of experience researching personal finance topics. Specialties include general financial planning, career development, lending, retirement, tax preparation, và credit." data-inline-tooltip="true">Amanda Bellucco-Chatham

Amanda Bellucco-Chatham is an editor, writer, & fact-checker with years of experience researching personal finance topics. Specialties include general financial planning, career development, lending, retirement, tax preparation, and credit.


What Is Financial công nghệ (Fintech)?

Financial technology (better known as Fintech) is used to describe new tech that seeks to improve & automate the delivery và use of financial services. ​​​At its core, fintech is utilized to lớn help companies, business owners, and consumers better manage their financial operations, processes, và lives by utilizing specialized software & algorithms that are used on computers and, increasingly, smartphones. Fintech, the word, is a combination of "financial technology."


When fintech emerged in the 21st century, the term was initially applied to lớn the công nghệ employed at the back-end systems of established financial institutions. ​Since then, however, there has been a shift khổng lồ more consumer-oriented services and therefore a more consumer-oriented definition. Fintech now includes different sectors and industries such as education, retail banking, fundraising và nonprofit, & investment management, lớn name a few.


Fintechalso includesthe development & use of cryptocurrencies,such asBitcoin. While that segment of fintechmay see the most headlines, the big money still lies in the traditional globalbankingindustry and its multi-trillion-dollarmarket capitalization.


Fintech refers to the integration of công nghệ into offerings by financial services companies in order to lớn improve their use và delivery lớn consumers.It primarily works by unbundling offerings by such firms và creating new markets for them.Startups disrupt incumbents in the finance industry by expanding financial inclusion & using giải pháp công nghệ to cut down on operational costs.Fintech funding is on the rise but regulatory problems exist.Examples of fintech applications include roboadvisors, payments apps, peer-to-peer (P2P) lending apps, investment apps, and crypto apps, among others.

Understanding Fintech

Broadly, the term "financial technology" can apply khổng lồ any innovation in how people transact business, from the invention of digital money lớn double-entry bookkeeping. Since the mạng internet revolution và the smartphone Internet/smartphone revolution, however, financial công nghệ has grown explosively. Fintech, which originally referred to lớn the use of computer công nghệ applied to lớn the back office of banks or trading firms, now describes a broad variety of technological interventions into personal và commercial finance.


Fintech now describes a variety of financial activities, such as money transfers, depositing a check with your smartphone, bypassing a ngân hàng branch to apply for credit, raising money for a business startup, or managing your investments, generally without the assistance of a person. According khổng lồ EY's 2017 Fintech Adoption Index, one-third of consumers utilize at least two or more fintech services and those consumers are also increasingly aware of fintech as a part of their daily lives.


Fintech in Practice

The most talked-about (and most funded) fintech startups cốt truyện the same characteristic: they are designed lớn be a threat to, challenge, and eventually usurp entrenched traditional financial services providers by being more nimble, serving an underserved segment of the population, or providing faster and/or better service.


For example, Affirm seeks khổng lồ cut credit thẻ companies out of the online shopping process by offering a way for consumers khổng lồ secure immediate, short-term loans for purchases. While rates can be high, Affirm claims khổng lồ offer a way for consumers with poor or no credit a way khổng lồ both secure credits & also build their credit histories. Similarly, Better Mortgage seeks khổng lồ streamline the home mortgage process (and obviate traditional mortgage brokers) with a digital-only offering that can reward users with a verified pre-approval letter within 24 hours of applying. GreenSky seeks to links home improvement borrowers with banks by helping consumers avoid entrenched lenders & save on interest by offering zero-interest promotional periods.


For consumers with no or poor credit, Tala offers consumers in the developing world microloans by doing a deep data dig on their smartphones fortheir transaction history và seemingly unrelated things, such aswhat di động games they play. Tala seeks to lớn give such consumers better options than local banks, unregulated lenders, và other microfinanceinstitutions.


In short, if you have ever wondered why some aspect of your financial life was so unpleasant (such as applying for a mortgage with a traditional lender) or felt lượt thích it wasn't quite the right fit, fintech probably has (or seeks khổng lồ have) a solution for you. For example, fintech seeks to answer questions like, "Why is what makes up my FICO score so mysterious, & how it is used lớn judge my creditworthiness?"


As such, loan originator Upstart wants khổng lồ make FICO(as well as other lenders both traditional và fintech) obsolete by using different data sets khổng lồ determine creditworthiness. They include employment history, education, và whether a would-be borrower knows their credit score to decide on whether lớn underwrite and how to price loans. Similartreatment is given lớn financial services that range from bridge loans for house flippers (LendingHome) to a digital investment platform that addresses the fact that women live longer and have quality savings requirements, tend to earn less than men, và have different salary curves that can leave less time for savings lớn grow (Ellevest).


Fintech's Expanding Horizons

Up until now, financial services institutions offered a variety of services under a single umbrella. The scope of these services encompassed a broad range from traditional banking activities lớn mortgage và trading services. In its most basic form, Fintech unbundles these services into individual offerings. The combination of streamlined offerings with giải pháp công nghệ enables fintech companies khổng lồ be more efficient & cut down on costs associated with each transaction.


If one word can describe how many fintech innovations have affected traditional trading, banking, financial advice, & products, it"s "disruption," lượt thích financial products & services that were once the realm of branches, salesmen, and desktops move toward sản phẩm điện thoại devices or simply democratize away from large, entrenched institutions.


For example, the mobile-only stock trading app Robinhood charges no fees for trades, & peer-to-peer lending sites lượt thích Prosper Marketplace, Lending Club, & OnDeckpromise to lớn reduce rates by opening up competition for loans to broad market forces. Business loan providers such as Kabbage, Lendio, Accion, and Funding Circle (among others) offer startup and established businesses easy, fast platforms to lớn secure working capital. Oscar, an online insurance startup, received $165 million in funding in March 2018. Such significant funding rounds are not unusual và occur globally for fintech startups.


Entrenched, traditional banks have been paying attention, however, & have invested heavily into becoming more lượt thích the companies that seek to lớn disrupt them. For example, investment bank Goldman Sachs launched consumer lending platform Marcus in năm nhâm thìn and recently expanded its operations khổng lồ the United Kingdom.


That said, many tech-savvy industry watchers warn that keeping apace of fintech-inspired innovations requires more than just ramped-up tech spending. Rather, competing with lighter-on-their-feet startups requires a significant change in thinking, processes, decision-making, and even overall corporate structure.


Fintech and New Technologies

New technologies, lượt thích machine learning/artificial intelligence (AI), predictive behavioral analytics, và data-driven marketing, will take the guesswork & habit out of financial decisions. "Learning" apps will not only learn the habits of users, often hidden to lớn themselves, but will engage users in learning games khổng lồ make their automatic, unconscious spending & saving decisions better. Fintech is also a keen adaptor of automated customer service technology, utilizing chatbots and AI interfaces to lớn assist customers with basic tasks and also keep down staffing costs. Fintechis also being leveraged to fight fraud by leveraging information about payment history to flag transactions that are outside the norm.


Fintech Landscape

Since the mid 2010s, fintech has exploded, with both startups receiving billions in venture funding (some of which have become unicorns), và incumbent financial firms either snatching up new ventures or building out their own fintech offerings.


North America still produces most of the fintech startups, with Asia a relatively close second, followed by Europe. Some of the most active areas of fintech innovation include or revolve around the following areas (among others):


Fintech Users

There are four broad categories of users for fintech: 1) B2B for banks and 2) their business clients, as well as 3) B2C for small businesses, & 4) consumers. Trends toward sản phẩm điện thoại banking, increased information, data, more accurate analytics, và decentralization of access will create opportunities for all four groups lớn interact in heretofore unprecedented ways.

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As for consumers, as with most technology, the younger you are the more likely it will be that you are aware of & can accurately describe what fintech is. The fact is that consumer-oriented fintech is mostly targeted toward millennials given the huge kích cỡ and rising earning (and inheritance) potential of that much-talked-about segment. Some fintech watchers believe that this focus on millennials has more to vị with the kích cỡ of that marketplace than the ability and interest of ren Xers and baby boomers in using fintech. Rather, fintech tends to lớn offer little khổng lồ older consumers because it fails lớn address their problems.


When it comes to lớn businesses, before the advent and adoption of fintech, a business owner or startup would have gone lớn a bank khổng lồ secure financing or startup capital. If they intended to accept credit thẻ payments they would have to lớn establish a relationship with a credit provider và even install infrastructure, such as a landline-connected card reader. Now, with smartphone technology, those hurdles are a thing of the past.


Regulation và Fintech

Financial services are among the most heavily regulated sectors in the world. Not surprisingly, regulation has emerged as the number one concern among governments as fintech companies take off.


As technology is integrated into financial services processes, regulatory problems for such companies have multiplied. In some instances, the problems are a function of technology. In others, they are a reflection of the tech industry's impatience khổng lồ disrupt finance.


For example, automation of processes và digitization of data makes fintech systems vulnerable to attacks from hackers. Recent instances of hacks at credit card companies and banks are illustrations of the ease with which bad actors can gain access khổng lồ systems and cause irreparable damage. The most important questions for consumers in such cases will pertain to lớn the responsibility for such attacks as well as misuse of personal information and important financial data.


There have also been instances where the collision of a giải pháp công nghệ culture that believes in a "Move fast & break things" philosophy with the conservative and risk-averse world of finance has produced undesirable results. San Francisco-based insurtech startup Zenefits, which was valued at over a billion dollars in private markets, broke California"s insurance laws by allowing unlicensed brokers to lớn sell its products & underwrite insurance policies. The SEC fined the firm $980,000 and they had khổng lồ pay $7 million lớn California"s Department of Insurance.


Regulation is also a problem in the emerging world of cryptocurrencies. Initial coin offerings (ICOs) are a new form of fundraising that allows startups khổng lồ raise capital directly from lay investors. In most countries, they are unregulated and have become fertile ground for scams and frauds. Regulatory uncertainty for ICOs has also allowed entrepreneurs khổng lồ slip security tokens disguised as utility tokens past the SEC khổng lồ avoid fees và compliance costs.


They have established fintech sandboxes to evaluate the implications of công nghệ in the sector. The passing of General Data Protection Regulation (GDPR), a framework for collecting và using personal data, in the EU is another attempt lớn limit the amount of personal data available khổng lồ banks. Several countries where ICOs are popular, such as nhật bản and South Korea, have also taken the lead in developing regulations for such offerings lớn protect investors.


Because of the diversity of offerings in fintech and the disparate industries it touches, it is difficult lớn formulate a single và comprehensive approach to lớn these problems. For the most part, governments have used existing regulations and, in some cases, customized them khổng lồ regulate fintech.


Fintech has been applied to many areas of finance. Here are just a few examples.

Payments apps like Paypal, Venmo, Block (Square), Zelle, & CashApp make it easy to pay individuals or businesses online và in an instant.Personal finance apps such as Mint, YNAB, và Quicken SimpliFi let you see all of your finances in one place, set budgets, pay bills, and so on.P2P lending platforms like Prosper, Lending Club, & Upstart allow individuals và small business owners khổng lồ receive loans from an array of individuals who contribute microloans directly khổng lồ them.Crypto apps, including wallets, exchanges, và payments applications allow you to hold và transact in cryptocurrencies và digital tokens lượt thích Bitcoin và NFTs.InsurTech is the application of công nghệ specifically to lớn the insurance space. One example would be the use of devices that monitor your driving in order khổng lồ adjust tự động hóa insurance rates.

No. While banks và startups have created useful fintech applications around basic banking (checking & savings accounts, ngân hàng transfers, credit/debit cards, loans), many other fintech areas that have more to bởi with personal finance, investing, or payments (among others) have grown in popularity.


Fintechs make money in different ways depending on their specialty. Banking fintechs, for example, may generate revenue from fees, loan interest, and selling financial products. Investment apps may charge brokerage fees, utilize payment for order flow (PfOF), or collect a percentage of assets under management (AUM). Payments apps may earn interest on cash amounts và charge for features lượt thích earlier withdrawals or credit thẻ use.


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