Blog News The Fintech Industry Has Changed Finance Forever, Here’s How

The Fintech Industry Has Changed Finance Forever, Here’s How

date July 7, 2020 time 3 min read 909 views

Can you remember the last time you wrote a check? If you’re like most Americans today, you probably don’t write many anymore. But just 10 years ago, check-writing was not only commonplace, it was even taught in school.

The fintech industry has already changed how you do finance forever and you may not have realized it.

Fintech? What is fintech?

Fintech is short for financial technology and the fintech industry is one of the fastest-growing tech sectors in the world.

Fintech raked in about 137 billion in investments in just 2019 alone. And almost 90% of current financial institutions believe that part of their business will be lost to fintech companies in the next 5 years (1). That may seem like a large prediction at first, but it’s a very likely one. Here’s why.

For years, the largest driving forces behind the fintech industry were traditional financial institutions like banks. Some traditional fintechs you probably know well include:

  • Bank wires
  • ATMs
  • online banking
  • debit/credit cards

Other, more modern fintech trends include but aren’t limited to:

  • Electronic money transfers
  • Electronic payments
  • Online payment security
  • Online lending
  • Online investing
  • B2B transfer integrations
  • Credit scoring
  • “Robovesting”
  • Blockchain tech like DeFi

How big tech took over the financial industry

While banks for years have been on the cutting edge of the fintech industry, times change. In recent years, technology has moved at a faster pace than the old institutions can handle.

Bogged down in their established security protocols and fee structures, banks and other institutions have been slow to adapt to the demands of the modern customer. People don’t want to pay $30 wire fees to send money to their friends by the end of the day. They want to do it instantly.

The tech sector quickly responded to many of these demands. Early apps like PayPal and more recent ones like Venmo and Apple Pay interface with banks. They make sending a couple of bucks to friends much faster and easier than through a wire transfer. Other services like Square help merchants accept as many types of electronic payment options as possible.

There’s been a fintech revolution in traditional financial sectors like the investment industry too. Apps like Robinhood or MyConstant make it easy to gain interest on your spare cash without losing money to large broker transaction fees. They’ve opened the way to a whole new breed of budget investors.

What is fintech doing in the developing world?

In up-and-coming economies like in Southeast Asia, Africa, South America, and Eastern Europe traditional banking infrastructure historically never gained a firm foothold. Today, the need for capital and money storage among the unbanked grows much faster than banks and other money managers can appear.

Global fintech platforms like peer-to-peer lending and online banks have stepped in today to filled those gaps. They cover everything from money transfers to loan origination.

In China, the entire economic infrastructure has become integrated with fintech. Buying fruit from your local farmer can be done quickly by scanning a code on your phone through an Alipay or Wechat app linked to a Chinese bank account. Some taxis don’t even take cash anymore!

The fintech industry pushes onward

While fintech may be on track to replace banks, the process may take more time. Customers still perceive traditional institutions as more reassuring and secure. There’s something comforting about having a physical place where you can talk to people about your finances.

And traditional financial institutions have realized they risk losing customers to the convenience of new players. Modern fintech trends have lead the traditional institutions to finally innovate their operations. Though many see fintech as a race between new tech and old institutions, the actual future could very well be a continued symbiotic alliance.

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Peter Upton

Peter Upton

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Tags: fintech industry fintech trends what is fintech fintech financial technology fintech data

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