Definition:
The term “fintech” refers to a new financial industry that uses technology to improve financial activities. Fintech refers to new applications, processes, products, or business models in the financial services industry that are made up of one or more complementary financial services and are delivered as an end-to-end process over the Internet.
How financial technology works:
Artificial intelligence (AI), big data, robotic process automation (RPA), and blockchain are among the technologies used by fintech firms. AI algorithms can provide information about customer spending habits, allowing financial institutions to better understand their customers. Chatbots are yet another AI-powered tool that banks are beginning to employ to assist with customer service. Big data can be used to forecast client investments and market changes in order to develop new strategies and portfolios, analyze customer spending habits, improve fraud detection, and develop marketing strategies. Robotic Process Automation (RPA) is a type of artificial intelligence technology that automates specific repetitive tasks. RPA aids in the processing of financial data such as accounts payable and receivable more efficiently and often more accurately than the manual process. Blockchain is a new financial technology that has sparked significant investment from a wide range of businesses. Because blockchain is decentralized, it can eliminate the need for a third party to carry out transactions.
Applications:
Investment, insurance, trading, banking services, and risk management have all been automated using financial technology. Services may be provided by a variety of independent service providers, including at least one licensed bank or insurer. Interconnection is enabled by open APIs and open banking, and it is backed up by regulations such as the European Payment Services Directives. Robo-advisers are a type of automated financial adviser who gives financial advice or manages investments online with little to no human intervention. They offer digital financial advice based on mathematical rules or algorithms, and can thus be a low-cost alternative to human advisers.
Advantages:
Fintech (Financial Technology) has grown at a CAGR of 22.17 percent and is now worth USD 305.5 billion. The fintech market in India has reached $31 billion and is expected to grow by $84 billion by 2025. Fintech has simplified many financial processes and businesses by putting convenience at their fingertips. These technologies enable businesses to send and receive money in different currencies from their accounts without incurring high conversion fees. Fintech is a smart, efficient, convenient, and quick way, which is why most businesses prefer it. Robo advising is a relatively new and important sector of fintech. Companies that offer these services ask consumers specific questions and then use specialized algorithms to develop a customized investment strategy.
Disadvantages:
The fact that Fintech uses various providers may be the most significant disadvantage, as many customers dislike the idea of managing their deposits, borrowing, and investing through them. This is a widely held viewpoint among the Millennial generation.
Reference:
Van Loo, Rory (February 1, 2018). “Making Innovation More Competitive: The Case of Fintech”. UCLA Law Review. 65 (1): 232.
Chen, Chiu-Chin; Liao, Chia-Chun (September 15, 2021). Research on the development of Fintech combined with AIoT. IEEE. doi:10.1109/icce-tw52618.2021.9602952. Fintech is an industry that uses a series of technological innovations such as cloud computing and big data to allow technology to serve finance and greatly improve financial efficiency.
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