FinTech examples and statistics
Many people ask, what does FinTech mean? What are its definition and examples?
Simply put, FinTech (short for Financial Technology) is a sector of the economy that uses new technology and innovation to enhance and automate financial services. The basis of FinTech is to make things easier for both businesses and consumers by improving the management of their finances using computers and smartphones. It’s worth mentioning that many companies implementing such solutions either cooperate or strongly compete with traditional entities such as banks. FinTech is one of the fastest-growing tech sectors and it seems like it's just getting started.
When FinTech started - a historical outline
It is difficult to clearly define when the FinTech industry was born, but it's certainly nothing new. The institution of the bank has been known for centuries and it has been modernized from time to time. When talking about new technologies that changed banking, certainly the breaking point was the introduction of credit cards in 1950, followed by the appearance of ATMs - 1960. However, it was the Internet and online banking that influenced the fastest development of FinTech that we see today. Another trend that is certainly still evolving is mobile.
Why was the introduction of new technology into the financial world inevitable?
It goes without saying that the pace of life accelerated extremely in recent decades. The day is still 24 hours long, and people feel like there is less and less time to do things. It’s enough to mention better cars, better public transport, the possibility of taking care of official matters via the Internet, etc. And still, even in this ever-changing environment, banks are pretty much the same as they used to be 50 years ago. There was no way that this situation lasts any longer.
Of course, traditional players tried to modernize, to move finances to the online world, then created mobile apps to manage accounts and payments. But the truth is that it took them too long, and their products were not simple enough to use and associated with the bureaucratic approach familiar from banks.
What is the difference between Fintech and banks?
At this point, it is important to distinguish between certain terms. FinTech is not something that stands in opposition to traditional banks. So, it’s impossible to list the differences between FinTech and banks. FinTech is an area in which banks operate and, as it was stated in the above paragraph, they don’t always perform well. That is why some startups have decided to challenge the large, recognizable players in the market by creating so-called neobanks (also known as an online bank, internet-only bank, virtual bank, or digital bank). So the real question is what is the difference between traditional and new entities.
The main difference between traditional banks and neobanks is that the latter are only available online and don’t have branches in cities. Someone might say that such competition is madness. After all, large, traditional banks have been looking after their reputations for years, and above all, they have the resources to crush the emerging competition. As it turns out, not really. Neobanks while creating their applications focused on a good user experience and did everything to make the use of them as convenient as possible for users. They simplified the process of creating an account to a minimum and also made it possible to have funds in different currencies. An example of one of the first neobanks that has been successful on a global scale is Revolut. To open an account with it, it takes only 24 clicks in the mobile application. This is an approach that traditional banks are far from.
Will FinTech replace banks?
Many people wonder if banking will be done exclusively online in the future. It is also interesting to see if traditional banks will survive the influx of modern startups, which by the way will also have to compete fiercely with each other. For now, it seems that trust in traditional banks is high enough that they need not fear for their future. However, the emergence of new players has certainly forced them to use new technologies to make banking easier for customers. So one thing that is clear is that FinTech is the future.
How FinTech can help neobanks
Thanks to FinTech, the existence of neobanks is possible. Their founders can use technology to create applications with basic banking functions and prepare functions that are more advanced or tailored to different niches. For example, those that allow beneficial to the customer currency exchange, buying cryptocurrencies or investing. Functions that other banks do not have. All this is aimed at attracting modern users, for whom mobile banking is more interesting than traditional banking.
How FinTech can help traditional banks
Since competition is growing in the market, traditional banks have two choices: give up in this fight or pick up the gauntlet. They have an established brand among their customers and years of banking experience, so now technological development should be a must for them. Especially since many people are still afraid to trust new, untested institutions that don't have branches in cities. On the other hand, easy online and mobile banking is something that matters to a growing number of people. For all these reasons, FinTech seems like the best way for banks to develop.
What are examples of FinTech companies?
Although modern banking is a big part of it, FinTech is something much broader. We can include in the FinTech sector both fledgling start-ups and large companies that have been changing the image of the market for many years. Below is a list of popular FinTech companies operating in various fields:
Revolut - an English financial technology company that offers accounts featuring currency exchange, debit cards, virtual cards, Apple Pay, interest-bearing "vaults", commission-free stock trading, crypto, commodities, and other services. In 2020 Revolut became the UK's most valuable fintech.
Starling Bank - one of the most common UK digital challenger banks. It focuses on current and business account products.
PayPal - an American company operating an online payments system in the majority of countries that support online money transfers, and serves as an electronic alternative to traditional paper methods like checks and money orders. The company operates as a payment processor for online vendors, auction sites, and many other commercial users. It charges a fee in exchange for benefits such as one-click transactions and password memory. One of the founders is the famous Elon Musk, the richest man in the world.
Digital wallets, optimization of the household budget
Google Pay and Apple Pay - digital wallet platforms and online payment systems developed to power in-app, online, and in-person contactless purchases on mobile devices, enabling users to make payments with smartphones, tablets, or watches.
Bitcoin network - peer-to-peer payment network that operates on a cryptographic protocol. Users send and receive bitcoins, the units of currency, by broadcasting digitally signed messages to the network using bitcoin cryptocurrency wallet software. Transactions are recorded into a distributed, replicated public database
Ethereum - a decentralized, open-source blockchain featuring smart contract functionality. It allows entities to leverage blockchain technology to create numerous different digital ledgers and can be used to create additional cryptocurrencies that run on top of its blockchain. For example, Ethereum can be used to create tokens that are pegged 1:1 with the value of the United States dollar if a user wanted to transfer or hold the value of dollars on the blockchain.
Ethos Life - an example of a modern FinTech that aims to give people the ability to set up life insurance without unnecessary complications, medical exams or blood tests.
Insurify - an internet company that features a software platform that specializes in car insurance. Its software platform utilizes artificial intelligence, language processing, and chatbots it provides personalized recommendations that help its users to decide about their car insurance.
Capital raising and personal finance
Mint - a personal financial management website and mobile app for the US and Canada.
Clarity Money - all within the app, you can lower your bills, cancel wasteful accounts, transfer money, create a savings account and get your credit score. The app also provides unprecedented transparency intoyour spending.
Cosmose - a developer of a data analytics platform to predict the shopping behavior of consumers with regards to offline purchase. Its platform assists offline retailers in selling more of their product by connecting offline stores with online advertisements to predict where, when, and who will go shopping that enable retail brands to track and target offline audiences through online advertisements and measure the impact of their online marketing campaigns.
Want to know more FinTech examples? Read our case studies!
The popularity of fintech has led to more and more companies conducting research on this sector of the economy. Here are a few that are worth knowing:
- The global financial services market is projected to reach $26.5 trillion by 2022. (The Business Research Company, 2020);
- As of February 2021, there were 10,605 financial technology (Fintech) startups in the Americas, making it the region with the most Fintech startups globally. In comparison, there were 9,311 such startups in the EMEA region (Europe, the Middle East, and Africa) and 6,129 in the Asia Pacific region;
- According to the Global FinTech Adoption Index 2019, 96% of global consumers are aware of at least one FinTech services;
- The same report shows that in 2019, 64% of consumers worldwide have used one or more FinTech platforms;
- The most common reasons for using FinTechs are, according to respondents: Range of functionality and features (66%), Availability of services 24 hours a day, 7 days a week (55%), Ease in setting up, configuring and using the service (53%)
- In 2018, about 61 percent of Americans used digital banking, which is set to rise to 65.3% by 2022 as per Statista.com.
- One of the biggest FinTech products is digital payment, which holds 25% of the FinTech market.
- According to Business of Apps, 1.3 billion users made online payments using a mobile device last year (2020)
- According to the same study, the most popular mobile app for online payments is Aliapp (China).
These statistics show that the number of people managing their finances online is already huge, and is predicted to grow steadily over the coming years.