What is FinTech?

What's FinTech? The most typical question asked. FinTech stands for Financial technology. The answer seems obvious. A new software, processes, products, and business models in the financial services industry, that relates to conducting financial activities, with the end client/user being a financial institution or individual. Financial services include payments, banking, and insurance. Also, technologies artificial intelligence, machine learning, and blockchain are shaping the fintech industry. Yes, Fintech is a broad term. It almost encompasses everything that today's individuals or companies deal with in their day-to-day activities.

So what is the typical example of Fintech? We all are end-users of fintech but it's very transparent to us till you go through this post to understand what is Fintech. If you have purchased something online using your smartphone then payments made are using technology and it is Fintech.

What's set the scene being all around for fintech? The financial crisis eroded trust in the banking system and prompted them to seek better alternatives. This also pushed companies and individuals to be cost-sensitive as customers demand the same or better services at a reduced cost.

The fintech industry consequently benefited from an influx of venture funds. As per the PwC Fintech trends report 2017, global fintech investment by VCs touched $12.7 billion across 836 deals in 2016 alone. As per the report, " FinTech investments in Asia increased to $5.4 billion in 2016, up 12.5% from $4.8 billion in 2015, driven mainly by China and India". The increase in investment in 2016 despite unfavorable economic conditions highlights Asia as one of the most promising regions for FinTech investment".

With so much interest building into fintech, a lot of fintech companies are seeking to achieve innovation. Also, the creative destruction caused by Agile methodologies driving increased innovation and neck-to-neck competition with Fintech startups. The innovation will help these companies to differentiate themselves from each other.

To put it differently, fintech loan providers possess around four percent additional margin in their own loans because they don't have buildings, staff, supply costs, etc. These startups are eating into the profits of large financial establishments forcing them to innovate. If we have to list different pillars of the FinTech ecosystem then we can list them as Investors (VCs, Angel Investors, PE firms), Financial institutions, technology startups, and end-users of financial services.

Now with fintech in the picture, it is possible for peer-to-peer lending with different financial service providers. Anyone can be a de facto bank and - - lend money, and - earn interest on it. All these fintech services make our lives faster, easier, and cheaper.