Fintech is a blanket term for disruptive technologies affecting the financial services industry. Fintech, or financial technology, encompasses a wide of range companies using software to provide financial services. Financial technology companies are generally characterised as being startups created to disrupt existing financial models and the larger financial corporations that are less integrated with technology. Though, larger corporations are increasingly recognizing the need for software solutions and are turning to Fintech to increase and improve their financial service offerings.
The Advantages of Fintech
Global investment in financial technology has exploded in recent years. Fintech now makes up a multi-billion dollar industry, still dominated by startups offering technological solutions to financial services and products.
Fintech levels the financial playing field for everyday people, giving them access to services previously reserved for the wealthy or individuals of a certain economic stature. Take investing for one example. Technology and data make it much easier and cheaper to bring investment advice to the masses, which mean something that was geared toward a certain asset level is now open to everyone.
Or consider lending. In the past, underwriters only had a few data sets to rely on when assessing risk, which meant lots of people were turned down or charged a higher interest rate for a loan. Fintech is relying on different information when underwriting consumers, looking at things traditional banks have never considered and providing more people with access to personal and business capital. All of that could never happen without powerful computer systems and software and data scientists who can make sense of it all.
When it comes to Fintech, the number of players and services are plentiful, largely in the more basic aspects of financial services including banking, investing, borrowing and saving. It’s also finding its way into applying for mortgages and even purchasing insurance, thereby giving consumers a lot of new options.
- Smart contracts can enable automated clearing upon trade completion
- Allowing access to multiple users for robust monitoring
- Increased transparency as information asymmetries are eliminated
- Real time updates on the positions of the underlying collateral with consistent valuation methodologies
- Securely transparently move securities and assets in seconds or minutes
- Enables point to point settlement lowering the cost and risk of transactions
- Smart contracts can facilitates custodian services or decentralised platforms eliminating intermediaries
The future of Financial industry Technologies
The new frontier technologies that will push for the next hype in Fintech:
Robo Advisors: Robo Advisors are online investment services that assess a user’s risk profile and match it with a diversified and low-cost investment portfolio. Algorithms keep managing the investments to optimize returns and taxes. The first wave of robo-advisors is selling model portfolios only, but the future looks much more personalized.
One of the most prominent examples of Fintech disrupting traditional ways of working is mobile banking. Previously, trust and security issues would have made consumers hesitant to make any transaction, no matter how small, using their Smartphone. But now, smartphones are providing one of the foremost examples of Fintech innovation. In the UK and other western countries, mobile banking has made financial transactions much simpler and efficient, improving the customer experience. In less developed markets, however, Fintech is making an even more profound impact. Smartphones are enabling individuals that do not have access to a bank to send and receive money via their Smartphone. In this respect, mobile banking is giving consumers greater independence and control over their finances.
In Mauritius one Fintech example could be MCB Juice which enables users to view all their banking details on their Smartphone and carry transaction without the need of an ATM or card.
Why Is Fintech Important?
Because fintech does not refer to one particular piece of technology, its impact is being felt across a range of industries and in both the business and consumer markets. From an investor point of view, fintech is creating important changes to the way in which businesses secure funding. Peer-to-peer lending and equity crowdfunding, both enabled by digital technologies, are empowering startups to launch and SMEs to grow more easily by allowing them to secure alternative investment capital.
Traditional investment options, like banks, are not always suitable for small, short-term loans, or may simply reject risky business propositions. In fact, a recent Goldman Sachs report estimated crowd funding to have a potential market value of $1.2 trillion, making it the largest Fintech vertical.
Fintech has also changed the way in which consumers view financial services. Just like any other aspect of their lives, they now expect banking and transactions to be seamless, quick and secure. Inconvenience, delays and even transaction fees are no longer considered acceptable in the world of finance because digital technologies have shifted consumer expectations. Businesses that are unable to keep pace with these expectations are likely to be overtaken by a more agile competitor.
The Anglo African team can assist you in unlocking the full potential of FinTech for the prosper of your business. If you have any queries or if you would like further information, please contact us on 2331636 or by e-mail at email@example.com.