The World of Fintech
In the past few years, we all have heard of the term Fintech at least once. But what exactly is fintech, and how has it come to define the modern financial world? Let's begin by looking at the word fintech. It is a portmanteau of the words finance and technology. It consists of a wide range of products, technologies, and services. In fact, even cryptocurrency falls under the domain of fintech.
What is Fintech?
In the past few years, we all have heard of the term Fintech at least once. But what exactly is fintech, and how has it come to define the modern financial world? Let's begin by looking at the word fintech. It is a portmanteau of the words finance and technology. It consists of a wide range of products, technologies, and services. In fact, even cryptocurrency falls under the domain of fintech.
The vast domain of fintech
Every time you transfer money via Paytm, invest in cryptocurrency via online trading apps or interact with a virtual assistant on banking sites, you are using fintech. It was used to create back-end solutions for established financial institutions in the early days. But as of now, it is also being used in various day to day customer-oriented services. Despite being a buzzword lately, fintech has been around for decades. In fact, ATMs, credit cards and signature verifying technologies are some classic examples. Being one of the fastest-growing areas for venture capitalists, it surely attracts a lot of attention. Fintech companies integrate technologies (like AI, blockchain and data science) into traditional financial sectors to make them safer, faster and more efficient. The following are some of the leading examples of fintech services in our daily lives:
ONLINE BANKING
One of its most common applications is mobile banking. The digitalization of banks has changed the whole experience of checking savings, payments, getting loans, investing money and availing of banking services. Customers no longer need to visit physical branches. This has enabled people, especially the elderly, to avoid being dependent on someone to take them to the bank to complete any transaction. From using KYC, tap and pay feature on mobiles and UPI money transfer, the banking sector in India has come a long way. The rapid pace of adoption of this trend has also led to the setting up of neobanks. Neobanks are digital banks, i.e. they have no physical branches and offer a wide variety of financial services like regular banks.
BLOCKCHAIN AND CRYPTO
The discussion in fintech is incomplete without discussing the birth of cryptocurrency and blockchain technology. Though not exactly an example of fintech, it is closely associated with the realm. Indian crypto and blockchain start-ups are reimagining the economic space in India. Despite uncertainty about the regulations, these start-ups have raised quite a lot of capital in the past few years. CoinDCX, India's first crypto unicorn, is a cryptocurrency exchange for easy buying and selling cryptocurrencies like bitcoin. Other successful start-ups in this field are Vauld, GoSats, WazirX and CoinSwitch. The funding garnered by crypto start-ups in India has crossed the $100 million mark. Part of the reason for growing investor confidence in such start-up’s is the growth of DeFi globally. DeFi stands for Decentralized Finance.
INVESTMENT APPS
The past few years have seen an explosion in investing and savings apps. The pandemic has also seemingly increased the interest in learning about investment policies and tactics. These apps have simplified the process and brought more and more small investors into the game. Zerodha Broking Ltd, an Indian financial services company, attained a self-assessed valuation of over $1 billion based on ESOP buyback in June 2020. Other apps like Groww and Upstox have also gained traction of late. According to data provided by Trade Brains, Zerodha holds an 18.85% market share, followed by Upstox with a 10.9% market share. Another start-up named Stockily provides investment opportunities in the US via their partner Drivewealth.
FASTER PAYMENTS
One of the most commonly used FinTech services is the online payments service. Apps like Paytm, PhonePe, Mobikwik and BHIM are widely used for cashless payments. Needless to say, the pandemic accelerated the growth of such startups owing to the need for contactless transactions. Scan-to-pay, pay-to-contact and pay using UPI ID are some of the ways through which you can pay another user. It has made transactions faster, easier and much more efficient. Even the traditional banking institutions have come up with online payment services, for example, iMobile Pay(by ICICI Bank) and YONO app(by SBI).
LENDING & INSURANCEs
Fintech has also greatly enhanced lending and insurance services by making them more accessible and speeding up the processes. Also, the risk assessment process can be made more inclusive for underserved populations by improving the models for assessment.
CONCLUSION
Fintech has emerged as one of the leading sectors in the modern world. The mayhem caused by the pandemic has somehow added fuel to it and made its adoption a lot quicker. With the business world on the path to becoming more tech-based and virtually endless possibilities to enhance the rendered financial services, there is no telling what innovations we'll see next. However, one thing is for sure, the field of fintech is here to stay and grow.
