There is a real buzz around financial technology or ‘fintech’.
But for many, it’s still a complex area to understand. I have a lot of experience in fintech and am sharing my knowledge in this fintech 101 for beginners.
First up, what exactly is fintech?
A beginner’s guide to fintech
Basically, it’s the way that technology is now being used to transform the financial industry. Tech is already having a big impact on lots of industries, and now it is the turn of finance.
With fintech, we’re seeing how everything from cloud technology and smartphone apps to blockchain are having a huge impact on the financial industry.
It’s a fascinating meeting of two very different sectors. This clash of cultures is already sparking huge amounts of innovation.
We’re seeing financial institutions using tech solutions to solve old financial problems. So, rather than walking into a branch to request your balance, you can now just do it via a banking app or an online only bank like Starling Bank or Monzo.
Or, we’re seeing a tech-based start up like Lending Club who are using peer to peer network technology to help their users to loan each other money, without getting a traditional bank involved.
How is fintech is changing the financial industry?
With Fintech user experience comes first
To be successful in any business, you must be relentless about improving customer experience. Banks are learning a huge amount from the tech industry about this. Ultimately, almost all the innovations we’re seeing in fintech address this.
The rise of mobile banking apps is a great example of this.
In the best examples fintech developers have learned all the good lessons about user experience and accessibility from the non-banking world and re-applied them in this context.
And traditional banks in turn are then learning from online only banks too. We’re now seeing them assimilating the user-friendly features from online only – like instant notifications – into their own apps.
Banks and financial institutions are using this know-how to build loyalty and even cross-sell their products and services, directly through someone’s smartphone or tablet.
Fundamental shifts in the world of finance
But Avner explains that there are other, less tangible fintech innovations that are arguably having an even bigger impact on the world of finance.
He believes that blockchain is a piece of financial technology that can transform many different areas of our business.
I think that blockchain, as an open-source distributed database using the very latest cryptography, truly is a game changer. It is already being used to underpin crypto currencies like Bitcoin and Ethereum.
The secure and shared nature of blockchain allows us to create currencies that no longer rely on a central bank or costly intermediaries.
The whole financial system speeds up as a result. We’re seeing reduced admin costs and fewer fees. Most importantly, many transactions are now peer-to-peer. And that represents a fundamental shift in power from institutions to individuals.
Data is king
Another benefit of fintech for the financial industry is in data.
In business, customer data is everything. And for the financial industry, fintech offers a powerful way to collect vast amounts of it on its users.
It helps to analyse and predict customer behaviour which is invaluable when it comes to developing new products and services.
It’s also leading to more highly personalised products and services. This personal experience that people have when they interact with their financial provider will give them the competitive edge in a tough market.
Maybe you’re investing in an Initial Coin Offering or just paying back a friend quickly and easily using a banking app. Whatever it is, fintech can enable this. But regardless of how user-friendly the tech is, trust must be the number one priority.
Customers need to know that their money is secure. The challenge is that this kind of trust takes a lot of time to build up – and only moments to lose.