Fintech: Digitizing of the Financial Industry

The metamorphosis of financial technology (fintech) began with the invention of the ATM, or cash machine. ATMs gave people the freedom to make deposits, withdraw money, transfer money, and make account inquiries without speaking to a human bank teller. The invention of the cell phone was another milestone which helped redefine fintech. This article will examine fintech and its impact on everyday life.

What is Fintech?

Fintech is short for financial technology. It refers to digital, mobile, and online technology that businesses in the financial industry utilize. Fintech seeks to appeal to customers by offering user-friendly, automated products and services. It involves intangible assets that have a monetary value.

Evolution of Fintech

Fintech 1.0

Fintech 1.0 is the period between 1866 – 1967, during which the relationship between finances and technology began. Early technology such as the telegraph, railroad, and steamboats opened the door for global business relationships.

Fintech 2.0

Fintech 2.0 is the period between 1967 – 2008. This era brought a shift from analog to digital technology. Online, virtual banking began to offer a new level of convenience.  During this time, the practice of electronic trading of securities was established, in addition to the ability to see trading data in real-time. Critically, a group of developers created the blockchain model.

Fintech 3.0

Fintech 3.0 is the current era that started in 2008. This era birthed startup and technology companies that provide financial products and services. Bitcoin, an alternate form of currency, arose. Blockchain technology and mobile payments emerged.

Fintech in Financing

Peer-to-peer (P2P) lending

P2P allows companies and individuals to loan money to small businesses and individuals without the backing of a financial institution. P2P lending uses fintech by simplifying the loan process, using alternate information to determine credit worthiness, and speeding up the approval process. Some of the more popular P2P lenders are:

• Affirm

• Tala

• Avant

• Upstart

Business-to-business (B2B) financing

B2B allows larger companies to invest in small to medium-size businesses. B2B uses fintech by utilizing big data and machine learning to determine creditworthiness and blockchain technology to record payments. Some of the popular B2B lenders are:

• Fundbox

• QuickBooks Capital

• Kabbage

• BlueVine

Crowdfunding

A digital platform that allows a person or group to pool their funds for a common goal.  Typical uses of crowdfunding are helping individuals pay for expenses, funding startups, and sharing medical expenses. Some popular crowdfunding platforms are:

• GoFundMe

• Medi-share

• Patreon

• LendingClub

• SeedInvest

Fintech in Asset Management

Personal Finance Management

Apps that automate the payment, organization, and management of personal finances. Some popular apps are:

• Prism

• Everydollar

• Mobills

Robo-advice

Helps manage investment portfolios by offering automated advice, projections, and predictions. Some popular robo-advisers are:

• Vanguard Digital Advisors

• SoFi

• Axos Management Portfolios

• Ally Invest Robo Portfolios

Fintech in Payments

Cryptocurrency

Virtual currency secured by blockchain technology. Examples of cryptocurrency are:

• Bitcoin

• Dogecoin

• Ethereum

Alternate Payment Methods

Alternative ways to pay using mobile phones and digital wallets. Some alternate payment methods are:

• PayPal

• Google Pay

• Apple Pay

• WeChat Pay

Development Areas and Skills Needed in Fintech

Financial Programming

Analyzes the current state of the economy and gives a forecast of the future state of the economy. Programming languages and concepts used to create models are:

• Python

• R

• Matlab

• SQL

• Matplotlib

• SciPy

• PyViz

Machine Learning

Uses algorithms and models to make future predictions. Some of the concepts and algorithms used to predict outcomes  are:

• Random Forest

• K-Nearest Neighbors

• Regression

• Clustering

• Neutral Networks

Blockchain

Used to provide a secure network for virtual currency. Blockchain technology uses the following skills:

• Solidity

• Smart Contracts

• Ethereum

Conclusion

Fintech is an ever-evolving field with longevity. Digital technology opened the door for new and innovative technology in the financial industry. Mobile and online platforms offer convenient ways for people to automate personal and business banking, financial management, and charitable giving. With the aid of machine learning and artificial intelligence, fintech will continue to thrive.

References

11 best robo-advisors of December 2021. NerdWallet. (n.d.). Retrieved December 26, 2021, from https://www.nerdwallet.com/best/investing/robo-advisors

Blockchain cryptocurrency finance - free image on Pixabay. (n.d.). Retrieved December 26, 2021, from https://pixabay.com/illustrations/blockchain-cryptocurrency-finance-3206918/

Brian Martucci writes about credit cards, Martucci, B., & Brian Martucci writes about credit cards. (n.d.). What is cryptocurrency – how it works, History & Bitcoin Alternatives. Money Crashers. Retrieved December 26, 2021, from https://www.moneycrashers.com/cryptocurrency-history-bitcoin-alternatives/

A brief timeline of fintech - understanding fintech. (n.d.). Retrieved December 26, 2021, from http://www.theiyerreport.com/wp-content/uploads/2017/07/A-Brief-Timeline-of-Fintech.pdf

Curriculum overview: Rice university fintech boot camp. Rice University Boot Camps. (n.d.). Retrieved December 26, 2021, from https://techbootcamps.rice.edu/fintech/curriculum

List of top B2B Fintech firms. Tearsheet. (n.d.). Retrieved December 26, 2021, from https://tearsheet.co/funding/list-of-top-b2b-fintech-firms/

Sabo, T. (2021, September 29). 15 best crowdfunding sites you should use in 2019. Wix Blog. Retrieved December 26, 2021, from https://www.wix.com/blog/2019/05/best-crowdfunding-sites/