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Financial Technology (Fintech): Its Uses and Impact on Our Lives

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Table of Contents

What Is Financial Technology?

Understanding Fintech

Fintech in Practice

Fintech’s Expanding Horizons

Fintech and New Technologies

Fintech Landscape

Fintech Users

Regulation and Fintech

Fintech FAQs

Investing

FinTech

Financial Technology (Fintech): Its Uses and Impact on Our Lives

Julia Kagan

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Julia Kagan is a financial/consumer journalist and former senior editor, personal finance, of Investopedia.

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Updated December 20, 2023

Reviewed by

Eric Estevez

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Amanda Bellucco-Chatham

Fact checked by

Amanda Bellucco-Chatham

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Amanda Bellucco-Chatham is an editor, writer, and fact-checker with years of experience researching personal finance topics. Specialties include general financial planning, career development, lending, retirement, tax preparation, and credit.

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What Is Financial Technology (Fintech)?

Financial technology (better known as fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. At its core, fintech is utilized to help companies, business owners, and consumers better manage their financial operations, processes, and lives. It is composed of specialized software and algorithms that are used on computers and smartphones. Fintech, the word, is a shortened combination of “financial technology.”

When fintech emerged in the 21st century, the term was initially applied to the technology employed at the backend systems of established financial institutions, such as banks. From 2018 or so to 2022, there was a shift to consumer-oriented services. Fintech now includes different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management, to name a few.

Fintech also includes the development and use of cryptocurrencies, such as Bitcoin. While that segment of fintech may see the most headlines, the big money still lies in the traditional global banking industry and its multitrillion-dollar market capitalization.

Key Takeaways

Fintech refers to the integration of technology into offerings by financial services companies to improve their use and delivery to consumers.It primarily works by unbundling offerings by such firms and creating new markets for them.Companies in the finance industry that use fintech have expanded financial inclusion and use technology to cut down on operational costs.Fintech funding is on the rise, but regulatory problems exist.Examples of fintech applications include robo-advisors, payment apps, peer-to-peer (P2P) lending apps, investment apps, and crypto apps, among others.

Paige McLaughlin / Investopedia

Understanding Fintech

Broadly, the term “financial technology” can apply to any innovation in how people transact business, from the invention of digital money to double-entry bookkeeping. Since the internet revolution, financial technology has grown explosively.

You likely use some element of fintech on a daily basis. Some examples include transferring money from your debit account to your checking account via your iPhone, sending money to a friend through Venmo, or managing investments through an online broker. According to EY’s 2019 Global FinTech Adoption Index, two-thirds of consumers utilize at least two or more fintech services, and those consumers are increasingly aware of fintech as a part of their daily lives.

Fintech in Practice

The most talked-about (and most funded) fintech startups share the same characteristic: They are designed to challenge, and eventually take over, traditional financial services providers by being more nimble, serving an underserved segment of the population, or providing faster or better service.

For example, financial company Affirm seeks to cut credit card companies out of the online shopping process by offering a way for consumers to secure immediate, short-term loans for purchases. While rates can be high, Affirm claims to offer a way for consumers with poor or no credit a way to secure credit and build their credit history.

Similarly, Better Mortgage seeks to streamline the home mortgage process with a digital-only offering that can reward users with a verified pre-approval letter within 24 hours of applying. GreenSky seeks to link home improvement borrowers with banks by helping consumers avoid lenders and save on interest by offering zero-interest promotional periods.

For consumers with poor or no credit, Tala offers consumers in the developing world microloans by doing a deep data dig on their smartphones for their transaction history and seemingly unrelated things, such as what mobile games they play. Tala seeks to give such consumers better options than local banks, unregulated lenders, and other microfinance institutions.

In short, if you have ever wondered why some aspect of your financial life was so unpleasant (such as applying for a mortgage with a traditional lender) or felt like it wasn’t quite the right fit, fintech probably has (or seeks to have) a solution for you.

Fintech’s Expanding Horizons

In its most basic form, fintech unbundles financial services into individual offerings that are often easier to use. The combination of streamlined offerings with technology allows fintech companies to be more efficient and cut down on costs associated with each transaction.

If one word can describe how many fintech innovations have affected traditional trading, banking, financial advice, and products, it’s “disruption”—a word you have likely heard in commonplace conversations or the media. Financial products and services that were once the realm of branches, salespeople, and desktops are now more commonly found on mobile devices.

For example, the mobile-only stock trading app Robinhood charges no fees for trades, and peer-to-peer (P2P) lending sites like Prosper Marketplace, LendingClub, and OnDeck promise to reduce rates by opening up competition for loans to broad market forces. Business loan providers such as Kabbage, Lendio, Accion, and Funding Circle (among others) offer startup and established businesses easy, fast platforms to secure working capital. Oscar, an online insurance startup, received $165 million in funding in March 2018. Such significant funding rounds are not unusual and occur globally for fintech startups.

This shift to a digital-first mindset has pushed several traditional institutions to invest heavily in similar products. For example, investment bank Goldman Sachs launched consumer lending platform Marcus in 2016 in an effort to enter the fintech space.

That said, many tech-savvy industry watchers warn that keeping apace of fintech-inspired innovations requires more than just ramped-up tech spending. Rather, competing with lighter-on-their-feet startups requires a significant change in thinking, processes, decision making, and even overall corporate structure.

Fintech and New Technologies

New technologies, such as machine learning/artificial intelligence (AI), predictive behavioral analytics, and data-driven marketing, will take the guesswork and habit out of financial decisions. “Learning” apps will not only learn the habits of users but also engage users in learning games to make their automatic, unconscious spending and saving decisions better.

Fintech is also a keen adapter of automated customer service technology, utilizing chatbots and AI interfaces to assist customers with basic tasks and keep down staffing costs. Fintech is also being leveraged to fight fraud by leveraging information about payment history to flag transactions that are outside the norm.

Fintech Landscape

Since the mid-2010s, fintech has exploded, with startups receiving billions in venture funding (some of which have become unicorns) and incumbent financial firms either snatching up new ventures or building out their own fintech offerings.

North America still produces most of the fintech startups, with Asia a relatively close second, followed by Europe. Some of the most active areas of fintech innovation include or revolve around the following areas (among others):

Cryptocurrency (Bitcoin, Ethereum, etc.), digital tokens (e.g., non-fungible tokens, or NFTs), and digital cash. These often rely on blockchain technology, which is a distributed ledger technology (DLT) that maintains records on a network of computers but has no central ledger. Blockchain also allows for so-called smart contracts, which utilize code to automatically execute contracts between parties such as buyers and sellers.

Open banking, which is a concept that proposes that all people should have access to bank data to build applications that create a connected network of financial institutions and third-party providers. An example is the all-in-one money management tool Mint.

Insurtech, which seeks to use technology to simplify and streamline the insurance industry.

Regtech, which seeks to help financial service firms meet industry compliance rules, especially those covering Anti-Money Laundering and Know Your Customer protocols that fight fraud.

Robo-advisors, such as Betterment, utilize algorithms to automate investment advice to lower its cost and increase accessibility. This is one of the most common areas where fintech is known and used.

Unbanked/underbanked services that seek to serve disadvantaged or low-income individuals who are ignored or underserved by traditional banks or mainstream financial services companies. These applications promote financial inclusion.

Cybersecurity. Given the proliferation of cybercrime and the decentralized storage of data, cybersecurity and fintech are intertwined.

AI chatbots, which rose to popularity in 2022, are another example of fintech’s rising presence in day-to-day usage.

Fintech Users

There are four broad categories of users for fintech:

Business-to-business (B2B) for banks

Clients of B2B banks

Business-to-consumer (B2C) for small businesses

Consumers

Trends toward mobile banking, increased information, data, more accurate analytics, and decentralization of access will create opportunities for all four groups to interact in unprecedented ways.

As for consumers, the younger you are, the more likely it will be that you are aware of and can accurately describe what fintech is. Consumer-oriented fintech is mostly targeted toward Gen Z and millennials, given the huge size and rising earning potential of these generations.

When it comes to businesses, before the adoption of fintech, a business owner or startup would have gone to a bank to secure financing or startup capital. If they intended to accept credit card payments, they would have to establish a relationship with a credit provider and even install infrastructure, such as a landline-connected card reader. Now, with mobile technology, those hurdles are a thing of the past.

Regulation and Fintech

Financial services are among the most heavily regulated sectors in the world. As such, regulation has emerged as the number one concern among governments as fintech companies take off.

According to the U.S. Department of the Treasury, while fintech firms create new opportunities and capabilities for companies and consumers, they are also creating new risks to be aware of. “Data privacy and regulatory arbitrage” are the main concerns noted by the Treasury. In its most recent report in November 2022, the Treasury called for enhanced oversight of consumer financial activities, specifically when it comes to nonbank firms.

Regulation is also a problem in the emerging world of cryptocurrencies. Initial coin offerings (ICOs) are a form of fundraising that allows startups to raise capital directly from lay investors. In most countries, they are unregulated and have become fertile ground for scams and frauds. Regulatory uncertainty for ICOs has also allowed entrepreneurs to slip security tokens disguised as utility tokens past the U.S. Securities and Exchange Commission (SEC) to avoid fees and compliance costs.

Because of the diversity of offerings in fintech and the disparate industries it touches, it is difficult to formulate a single and comprehensive approach to these problems. For the most part, governments have used existing regulations and, in some cases, customized them to regulate fintech.

What are examples of fintech?

Fintech has been applied to many areas of finance. Here are just a few examples.Robo-advisors are apps or online platforms that optimally invest your money automatically, often for little cost, and are accessible to ordinary individuals.Investment apps like Robinhood make it easy to buy and sell stocks, exchange-traded funds (ETFs), and cryptocurrency from your mobile device, often with little or no commission.Payment apps like PayPal, Venmo, Block (Square), Zelle, and Cash App make it easy to pay individuals or businesses online and in an instant.Personal finance apps such as Mint, YNAB, and Quicken Simplifi let you see all of your finances in one place, set budgets, pay bills, and so on.Peer-to-peer (P2P) lending platforms like Prosper Marketplace, LendingClub, and Upstart allow individuals and small business owners to receive loans from an array of individuals who contribute microloans directly to them.Crypto apps, including wallets, exchanges, and payment applications, allow you to hold and transact in cryptocurrencies and digital tokens like Bitcoin and non-fungible tokens (NFTs).Insurtech is the application of technology specifically to the insurance space. One example would be the use of devices that monitor your driving in order to adjust auto insurance rates.

Does fintech apply only to banking?

No. While banks and startups have created useful fintech applications around basic banking (e.g., checking and savings accounts, bank transfers, credit/debit cards, and loans), many other fintech areas that have more to do with personal finance, investing, or payments (among others) have grown in popularity.

How do fintech companies make money?

Fintechs make money in different ways depending on their specialty. Banking fintechs, for example, may generate revenue from fees, loan interest, and selling financial products. Investment apps may charge brokerage fees, utilize payment for order flow (PFOF), or collect a percentage of assets under management (AUM). Payment apps may earn interest on cash amounts and charge for features like earlier withdrawals or credit card use.

Article Sources

Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our

editorial policy.

EY. “Global FinTech Adoption Index 2019,” Page 6.

Tala. “About Page.”

Fierce Healthcare. “Oscar Health Raises $165M in Additional Capital, Executives Say They Expect Company to Be Profitable Soon.”

Goldman Sachs. “Marcus by Goldman Sachs Leverages Technology and Legacy of Financial Expertise in Dynamic Consumer Finance Platform.”

U.S. Department of the Treasury. “New Treasury Report Shows Fintech Industry Requires Additional Oversight to Close Gaps, Prevent Abuses and Protect Consumers.”

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什么是fintech？金融科技？ - 知乎

什么是fintech？金融科技？ - 知乎首页知乎知学堂发现等你来答切换模式登录/注册互联网金融金融金融监管金融科技什么是fintech？金融科技？fintech关注者764被浏览750,359关注问题写回答邀请回答好问题 14添加评论分享42 个回答默认排序尊尼小叔大厂战略| 前英诺天使VP+鹅厂PM | 福布斯U30 关注今天我来讲讲金融科技（Fintech），主要讲四个方面：1、金融科技是什么？发展阶段2、具体有哪些客户？哪些应用场景？3、有哪些比较好的创业公司？年底跳槽推荐4、未来趋势和机会一、金融科技是什么？他的三个发展阶段金融科技的核心，仍然是“金融”，所以要搞明白金融科技，先要明白金融的本质是什么。金融的本质在于解决信息不对称，从而对资金的期限、规模和风险三者进行转换，以满足不同的投融资需求。金融科技是科技在金融领域的应用层，通过科技解决方案更好的解决核心问题——信息不对称。金融科技的发展大约分三个阶段，分别对应的不同技术在金融领域的应用阶段一：IT技术+金融通信技术的发展促进金融业务的电子化、信息化，例如信用卡、ATM的出现，提升网点服务能力，进一步扩张了银行零售业务的范围，减少了存贷款的交易成本，用户可以更方便的存取款，银行可以更方便的开展信贷业务。阶段二：互联网/移动互联网+金融1. 金融服务的范围和深度进一步延伸，比如移动支付和消费金融满足了无信用卡人群的支付和消费信贷需求，同时也替代了部分信用卡人群的需求。2. PC和移动端金融行为产生的海量用户数据，并打通了信息交互渠道，导致金融服务方式变革，比如手机银行、网上银行和互联网征信。阶段三：新科技+金融新科技主要是ABCDI技术，即AI、区块链（Blockchain）、云计算 (Cloud Computating)、大数据(Big Data)、物联网（IoT）等技术，进一步推动金融的智能化、数据化、普惠化，大幅减少信息不对称，降低服务交易成本，比如智能投顾和分布式金融。二、主要的客户和行业应用 1、传统金融业务供给方：证券、基金、保险、银行目前金融业务供给方主要结合AI、云计算、大数据和区块链技术，例如智能投研：获取和处理数据，构建知识图谱和训练机器学习的模型，并输出结果，生成报告，可以处理一些初级的研究报告（比如输出券商市场日报）智能风控：主要是通过大数据和云计算进行业务流程的风控。智能投顾：通过大数据、深度学习等技术为客户提供资产配置策略服务，降低理财门槛。（主要是降低人工成本，服务内容例如推荐债券、股票、基金等）智能客服：通过NLP、知识图谱等为客户提供资讯类服务（比如开设证券账户、银行卡、投资者教育等）供应链金融：主要应用区块大数据、云计算和区块链技术，解决供应链上信息传递的问题，例如链上签订合同，链上货权交割等，促进应收账款电子凭证的流转。2、互联网公司：大厂金融部门、互联网金融公司消费金融：通过生物识别，大数据，深度学习等技术实现和优化贷前、贷中、贷后的风控，降低坏账率，并且向B端输出产品或者解决方案。比如百度的度小满金融为B端输出反欺诈产品（信贷审查、监控，风控策略制定），信用产品（营销获客、信用监控），验证类产品（OCR文字识别、活体识别），智能催收等等。移动支付：满足消费者多种场景下的支付需求理财平台：为C端用户提供多元化理财产品，与支付业务形成互补，有支付需求的用户通常也会有理财需求，这一点支付宝、微信都是很常见的例子。3、政府金融部门监管金融：鹅厂开发的“灵鲲”是金融监管科技平台，将大数据应用与反欺诈技术监控现金贷、P2P、虚假理财、传销等场景，预警金融风险。主要服务的对象是政府机构，比如各省市金融局等。三、值得关注的Fintech公司第四范式（C轮金石投资元生资本红衫中国）前百度高级科学家戴文渊老师创立，“AI+金融”，主要为银行、保险等金融机构提供供应链金融解决方案；睿智科技（B轮华鼎资本远洋资本华创资本松禾资本）通过大数据、云平台为金融机构提供一站式科技赋能服务。薄荷保（A轮红衫中国贝斯塔曼投资基金）主营AI保险顾问服务，通过AI技术为C端用户实现智能保险配置决策虎博科技（A轮高榕资本 PAC 宜信新金融产投）AI金融信息搜索引擎，通过深度学习、自然语言处理技术实现金融信息的智能搜索和智能推荐圆心惠保（A轮红衫中国启明创投）通过互联网医院和药物交付资源，采用“线上 + 线下”模式，为保险公司提供保单审核服务。暖哇科技（天使轮红衫资本宽平资本）众安孵化成立的公司，主营健康险产品定制、风控、理赔等解决方案；道口金科（天使轮英诺天使）清华五道口金融学院打造的金融科技平台，通过大数据、AI、云计算等技术提供中小企业智慧信贷解决方案四、未来的趋势和机会1、企业服务是未来的关注焦点目前互联网红利已经见顶，针对C端的消费金融、移动支付等赛道竞争格局开始固化，理财仍然有拓展的空间，但在ABCDI技术没有进一步改变业务模式的情况下，C端业务很难有大的突破。传统金融机构在严监管下创新能力有所局限，依托新技术对企业端提供金融科技赋能是一个蓝海。 2、金融科技的参与者边界进一步模糊（巨头全覆盖趋势）金融科技领域的参与者主要有三类，一是传统金融机构例如券商、银行、保险等，二是技术提供方，三是金融科技解决方案的提供商，目前三者的边界逐渐模糊，展业金融机构开始自主开发的金融科技，从金融科技的消费端向供给端发展，例如平安集团。金融解决方案的提供方，申请金融业务牌照与传统金融机构开展竞争，例如蚂蚁金服。而提供底层技术的技术提供方开始在金融垂直领域开发标准化的解决方案，拓展业务边界，例如商汤科技。 3、可以关注的创业方向服务政府的，做金融监管；服务中小银行的，因为大行已经被做的差不多；服务一级投资机构的；可以从智能化、安全、合规等技术口切入，关注新技术在各场景下的创造的价值和落地机会。编辑于 2020-01-05 20:19赞同 1812 条评论分享收藏喜欢收起薛洪言2020 年度新知答主关注“千面”金融科技说到金融科技，每个机构都挂在嘴边，每个人也都能说上几个观点。可到底什么是金融科技？我们大家达成一致意见了吗？恐怕并没有。听不同的人谈金融科技，你会发现金融科技是不同的东西。当一些银行人谈金融科技时，他们会大谈特谈IT流程改造，也会谈一谈区块链应用和大数据整合。他们会一再强调金融科技的本质是金融——其实没人反驳这一点，科技要为金融业务服务。在他们眼里，金融科技是某种可以提升金融服务效率的东西，可以是技术，可以是硬件，也可以是渠道。当一些互金创业者谈金融科技时，他们会大谈特谈大数据风控，也会谈一谈流量变现，甚至在一些人口中，P2P平台的核心业务模式——信贷撮合——便是金融科技的最佳体现。他们会一再强调自己是家金融科技企业——其实没人认可这一点，不是现金贷，甚至也不是P2P。在他们眼里，他们的企业本身就是金融科技，他们在业务层面更高的市场份额，便是他们是一家领先的金融科技企业的最佳佐证。当一些互金巨头谈金融科技时，他们会大谈特谈科技赋能，也会谈一谈云计算、区块链、大数据、人工智能等布局。他们会一再强调自己不做金融业务——其实没人会在意这一点，他们的使命，是让金融机构更好地被科技赋能。在他们眼中，金融科技是用于赋能金融的IT、技术和流量，而他们对金融机构的赋能，便是金融科技的最典型应用。……上面的说法都有道理，但在我看来，都并不全面，也都有一些潜在的问题。若金融科技的价值仅仅是提高业务效率，那么金融科技显然是在为机构自身而非用户服务。脱离与用户的直接连接，金融科技会成为某种重要但不紧急的东西，会被挂在墙上、束之高阁。因为效率的提升政治正确但永无止境，重要但不紧急，我们不会急于一时；提升效率的手段也有万千种，也不会倚重科技一策。若金融科技就是P2P和现金贷的马甲，区块链、大数据等名词只是装点这个马甲的点缀，除了自欺欺人之外，看不出有什么额外的价值。若金融科技需要通过赋能实现其价值，那么金融科技就成为某种标准化的组件，可嵌入任何机构中发挥作用，类似于手机芯片，可以被任何厂商组装在智能手机中。如果这就是金融科技，那么于绝大多数金融机构而言，以拿来主义的心态接受赋能，就能与同业站在同一条起跑线上。此时，在决定金融机构的竞争力层面，金融科技将变得无足轻重，就像两款装备骁龙845的手机，芯片本身不再决定用户的选择。所以，这会是金融科技的真相吗？从用户视角看金融科技金融科技的价值，最终需要在用户服务的过程中反映出来。所以，当我们从用户的角度思考金融科技时，或许能找到关于金融科技的“标准”解读。用户关心的永远是产品体验，而非各种“黑科技”。传统银行与互联网金融机构的差距，也在于产品体验，而非科技。事实上，银行业每年在信息科技上投入超过千亿元人民币，大行的投入更是接近百亿，比很多金融科技巨头的年营收额还要高。站在用户的角度，产品体验的提升，才是金融科技之于金融机构的价值。所以，金融科技既非金融，也非科技，甚至也不是似是而非的金融与科技的融合，金融科技，应当是一种解决方案，集科技、客户洞察、金融场景、产品运营等于一体，帮助金融机构适应用户金融消费习惯的新变化。同样的逻辑，站在监管者的角度，会有监管科技；站在金融机构内部管理的角度，也可以延伸出管理科技的概念，都可以专门去讨论研究。但站在“以客户为中心”的角度，金融机构最应该关注的，还是这个基于用户视角的解读。在这个新的解读下，可以延伸出以下几个结论：1、不能离开金融场景谈金融科技在科技赋能的话语体系下，似乎我们可以抛开对金融的理解谈科技，这是一种误读。科技，需要内生于金融场景之中。金融机构发力金融科技，仅仅搭建几个实验室是不够的，重要的是在业务层面落地。信息科技人才不等于金融科技人才，只是将散落在金融机构内部的IT人才集中在一起，难以承担金融科技转型的重担。同样，对外合作中，金融机构需要的并非那些专门为赋能而赋能的新奇技术，比如没有数据源的大数据建模、没有应用场景的区块链技术、没有解决方案的云计算平台等，真正有价值的是那些在实际场景中得到验证的解决方案。2、同质化的赋能不是金融科技的全部站在赋能的视角，各家机构的金融科技布局大同小异——大数据风控、智能营销、区块链应用等等，但从用户体验解决方案角度看，考虑到不同机构资源禀赋、战略重心、机制文化、人才储备等的不同，最终在用户层面呈现出来的，是不同的体验。所以，不存在同质化的金融科技，同质化的赋能远不是金融科技的全部。3、金融科技终将走向平台化金融科技是一种解决方案，那么最佳的承载形式便是平台化：一家机构提供基础设施，多家机构在平台上协作，形成一个稳固的多边生态系统，以保障金融服务的高效和安全。平台化天然地与网络效应连接在一起，最终，一到两个巨头成为金融科技平台的载体。也不必恐惧，金融服务涉及多个环节，每个环节的市场空间都很大，都足以诞生出一到两家平台型机构。所以，未来的演变方向或许是，基于分工的不同，金融科技领域会诞生不同的平台型组织，这类组织以多边生态系统的形式保持竞争力，并对外提供服务。4、中小金融机构也可以发力金融科技金融科技的平台化协作，会大幅降低参与者的门槛，中小金融机构，也将成为生态内不容或缺的一份子。此外，金融科技的运用，技术层面可获取、同质化程度高，战略调整、思维模式、机制流程等软性因素的重要性会大大提高，只要能够扭转思维模式、转变心态，中小金融机构也有自己的比较优势。把目光放回用户身上对商业机构而言，一切的变革与冲击，归根结底都来自对用户需求的无视，以至于被其他机构“钻了空子”。正如凯文凯利在《必然》中所说，科技进步使得越来越多的东西以指数级的速度增加，一切都在增长，只有人类的注意力是固定的，结果必然是人类的注意力越来越稀缺，用户时间越来越宝贵。反映在金融业务上，便是用户对金融服务和产品的实时性和便捷性等体验方面的要求越来越高，而传统金融服务的提供者，无视这种变化，才会被体验更好的互联网金融机构打个措手不及。若无视用户对服务体验的新要求，眼睛里只是盯着“搅局”的新物种，就不可能真正理解冲击来自何处，也无力避免类似冲击的再次发生。最终的结果便是，在自己的一亩三分地上，金融业务不断地被其他机构“重新定义”。所以，请把目光放回用户身上，从用户的视角看待金融科技，以此来思索金融行业的未来与出路。作者：薛洪言，苏宁金融研究院互联网金融中心主任微信公众号：洪言微语——————————————————————————————————————PS:欢迎去我的LIVE分享页，系统了解互联网金融/金融科技相关知识编辑于 2020-09-06 15:38赞同 31916 条评论分享收藏喜欢

What is fintech (financial technology)? | McKinsey

is fintech (financial technology)? | McKinsey

Skip to main contentWhat is fintech?January 16, 2024 | ArticleSharePrintDownloadSaveFintechs are companies that rely primarily on technology and cloud services—and less so on physical locations—to provide financial services to customers.A 3D piggy bank covered in glowing binary numbers.

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These days, you’re almost more likely to see the inside of a bank branch in an old movie than you are in real life. But take a look at your phone: there are probably at least two money apps on your home screen—maybe more. According to McKinsey research, this is just one sign of a new era in payments. What’s one major development behind this shift? Short word, big concept: fintech.

Get to know and directly engage with senior McKinsey experts on fintech

Max Flötotto is a senior partner in McKinsey’s Munich office; Brian Ledbetter is a senior partner in the London office, where Tunde Olanrewaju is the managing partner of McKinsey’s UK, Ireland, and Israel offices; Alexis Krivkovich and Marie-Claude Nadeau are senior partners in the Bay Area office; and Eckart Windhagen is a senior partner in the Frankfurt office.

Fintechs—short for financial technology—are companies that rely primarily on technology to conduct fundamental functions provided by financial services, affecting how users store, save, borrow, invest, move, pay, and protect money. Most fintechs were launched after 2000, have raised funding since 2010, and have not yet reached maturity. They make it not only possible but also easy to move money between accounts, people, countries, and organizations. There’s no typical fintech company: fintechs include start-ups, growth companies, banks, nonbank financial institutions, and even cross-sector firms. Examples range from peer-to-peer payment services such as Venmo and Zelle to automated portfolio managers and stock- or cryptocurrency-trading apps such as Robinhood and Coinbase.

Fintech came to prominence around 2010, primarily in the payments space. Square, for instance, which was founded in 2009, enabled small companies or sellers to accept credit cards via a mobile device. Today, fintech disruptions have expanded to every corner of finance—even areas once assumed to be safe from digital threat. Fintech is spreading fast: in the United States, for example, almost one in two consumers in 2021 used a fintech product—primarily peer-to-peer payment products and nonbank money transfers. Fintechs also raised record capital in the second half of the 2010s: venture capital funding grew from $19.4 billion in 2015 to $33.3 billion in 2020.

But recently, the luster has worn off a bit: in 2022, a market correction caused a slowdown in fintech’s explosive growth momentum. As a result, fintechs have had to adjust to lower valuations and decreased willingness on the part of venture capital firms to fund companies with low margins. Rather than sprinting toward the hockey stick of old, fintechs today are focused on sustainable, profitable growth. Banks, in response, have seized the opportunity, developing their own fintech-informed digital products and services. In the future, competition for client deposits and balances will likely intensify.

But before we look into the future, let’s first explore the past and present. What is fintech, what kinds of convenience does it offer, and where in the world is it being used? Read on to find out.

Learn more about McKinsey’s Financial Services Practice.

Where is the banking industry in its digitization journey?

Banking is in its second era of digitization, according to McKinsey senior partner Brian Ledbetter. Traditionally, banks were anchored on a customer service arrangement that relied on branches and call centers. He says, “If you needed something, you’d either ring on the phone or go into the branch and get it done. Then, with the advent of smartphones, we discovered that mobile and digital technology was the primary way to engage with customers. . . . And so we had a boom in apps and automated journeys, which banks hooked up to their existing systems.”

This has led to a problem of technical debt: When banks set up this first phase of digitization, they did so with the technology they had at the time. Over time, these older systems have become obsolete. This created an opportunity for more agile fintech companies to disrupt business as usual, offering customers less clunky, more convenient ways of doing business. Today, banks are at an upgrade point for both the front and back ends. And their institutional capacity may be a benefit when it comes to adopting and deploying solutions based on rapidly advancing new technologies.

Which three themes will shape the next chapter of fintech growth?

According to our research, three trends will shape the next phase of fintech growth. First, fintechs will continue to benefit from the radical digital transformation of the banking industry and e-commerce growth around the world, particularly in developing countries. About 73 percent of the world’s interactions with banks now take place through digital channels. B2B firms are also demanding more fintech solutions than ever. To capitalize on the demand, fintechs will need to keep up with evolving regulations and ensure they have adequate resources to comply.

Introducing McKinsey Explainers: Direct answers to complex questionsExplore the series

Second, despite short-term pressures, fintechs still have room to achieve further growth in an expanding financial-services ecosystem. McKinsey estimates that fintechs will grow at roughly three times the overall banking industry’s growth rate between 2022 and 2028. Emerging markets will fuel much of this growth, particularly in Africa, Asia–Pacific (excluding China), Latin America, and the Middle East.

Finally, some fintechs are proving more resilient during the current market correction than others. Companies in the growth stage (series C and beyond) showed the highest sensitivity to 2022’s downturn. Fintechs in the early and pre-seed stages were more resilient. Funding for B2B fintechs was more resilient than that for B2C ones. Banking as a service (BaaS) and embedded finance, and small and medium-size enterprises (SMEs) and corporate value-added services were the verticals least affected by the downturn.

Learn more about McKinsey’s Financial Services Practice.

Which technologies are shaping the future of fintech?

Over the next few years, we predict that the following seven technologies will advance fintech development while shaping the competitive landscape of finance:

Artificial intelligence (AI) will propel massive value creation. Banks and other financial institutions are poised to adopt an AI-first mindset that will better prepare them to fend off expanding technology firms. McKinsey estimates that generative AI technologies alone may add up to $4.4 trillion annually to the global economy.

Blockchain. Blockchain will disrupt established financial protocols by allowing the storage of financial transactions in multiple places at once. Technologies such as smart contracts, zero-knowledge proof (a way of proving you have a piece of information without revealing what the information is), and distributed data storage and exchange—essential to existing fintech innovations such as digital wallets, digital assets, decentralized finance, and nonfungible tokens—will continue to play a prominent role.

Cloud computing. McKinsey research indicates that by 2030, cloud technology will account for EBITDA (earnings before interest, tax, depreciation, and amortization) in excess of $1 trillion across the world’s top 500 companies. For financial-services companies, cloud computing will increase efficiency and lower costs.

The Internet of Things (IoT). IoT applications for the finance industry include perception and smart sensor systems, wireless communication networks, and application and operations support.

Open-source software, serverless architecture, and software as a service (SaaS). These three technologies have become must-haves for technology companies and traditional financial institutions launching new fintech businesses. They enable increased speed and scalability, both critical for new businesses competing in the winner-takes-all digital economy.

No- and low-code development platforms. These allow programmers and general users to develop applications through graphical user interfaces and configurations (such as drag-and-drop) instead of traditional computer programming.

Hyper-automation. Hyper-automation is the use of AI, deep learning, event-based software, and other technologies and tools to improve decision-making efficiency and work automation.

How can fintechs shift toward sustainable growth?

Fintechs today are operating in a new environment. They can no longer afford to focus on growth at any cost. Given new liquidity constraints, fintechs are emphasizing profitability, not just growth in customer adoption numbers or total revenues. In 2019, McKinsey conducted a study of the growth patterns and performance of the world’s 5,000 largest public companies over the preceding 15 years. Based on our analysis, we expect four pathways to deliver the most impact for fintechs:

Cost discipline. Control costs to withstand the new funding environment while remaining flexible, nimble, and compliant.

Measured growth based on a stable core. Ensure there is a strong and stable core business with a targeted and proven market fit before expanding.

Programmatic M&A. Pursue M&A strategically and establish mutually beneficial partnerships based on programmatic strategy rooted in value sharing (with incumbents and other fintechs).

Keep the culture alive. Maintain the agility, innovation, and culture that have propelled disruption so far.

Learn more about McKinsey’s Financial Services Practice.

What is open financial data?

Financial data is pretty self-explanatory. It’s records of what we spend, save, and borrow, from mortgage payments to what we paid for this morning’s latte. In the past, banks have been the keepers of our financial data, and the idea of sharing it with anyone probably made us a little uncomfortable. Now, some of that data is being shared with third parties. This is a trend called open financial data or open banking.

Let’s make one thing clear: none of this happens without consumer consent. But when consumers do consent, they allow a new and growing set of actors—both financial and nonfinancial—to access their accounts and data to offer new products and services based on what they might need. This movement is still in its infancy but has big potential to reshape our bank accounts, credit cards, payments, mortgages, loans, and even insurance policies.

The adoption of new digital-banking habits, in part as a result of fintech disruptions, appears to have accelerated open banking.

What can incumbents do to prevent disruption from fintechs?

Fintechs have successfully highlighted existing financial institutions’ weaknesses—in digital user experiences as well as in operational efficiency. It almost doesn’t matter how much market share fintechs take from incumbents when they have so successfully recast customer expectations. At this point, it’s imperative for incumbents to transform to meet the new reality informed by fintechs. Here are seven actions for incumbents to consider:

Buy a fintech, whether for its traction, technology, or talent. But success depends on post-acquisition integration.

Partner with a fintech to induce faster time to market and cost-efficient implementation.

Invest in fintechs to hedge against some of the potential threat of disruption.

Transform to become more like a fintech. Transformation is necessary to compete with outside threats, fintech or otherwise.

Build an internal fintech. Increasingly, incumbents are building their own internal fintechs to self-disrupt areas of their business before others can disrupt them.

Serve the fintechs. A few financial institutions might find competitive advantage in BaaS, serving fintechs as well as retailers, telcos, and more.

Ignore fintechs. Ignoring competition is rarely the right choice, but some incumbents are built behind regulatory moats that are difficult to disrupt.

The right answer is probably a combination of the above, implemented after careful planning.

Learn more about McKinsey’s Financial Services Practice.

How is fintech changing the financial landscape of Africa?

Kenya has one of the highest levels of fintech penetration in the world, propelled largely by the explosive success of one fintech: M-Pesa. Launched in 2007, M-Pesa made it easier for Kenyans—and later, people in other countries—to use their mobile phones to reliably and quickly pay one another. It was quickly adopted by most Kenyans.1 William Jack and Tavneet Suri, “The long-run poverty and gender impacts of mobile money,” Science, December 2016, Volume 354, Number 6,317.

Between 2020 and 2021, the number of tech start-ups in Africa tripled to about 5,200 companies—and just under half of these are fintechs. Cash is used in about 90 percent of transactions in Africa, which means there is huge room for growth. If the sector overall can reach similar levels of penetration to those seen in Kenya, we’ve estimated that African fintech revenues could reach eight times their 2022 value by 2025.

Looking ahead, we anticipate that the growth opportunity in African fintech will likely be concentrated in 11 key markets: Cameroon, Côte d’Ivoire, Egypt, Ghana, Kenya, Morocco, Nigeria, Senegal, South Africa (home to the continent’s most mature banking system), Tanzania, and Uganda. Together, these markets account for 70 percent of Africa’s GDP and half its population.

Here are four challenges emerging African fintechs may face:

Reaching scale and profitability. The total addressable market (that is, the number of viable customers) for African fintechs may be limited by infrastructure constraints, including weak mobile and internet penetration, lack of internet coverage, and limited payment rails (the underlying infrastructure that facilitates transactions). Lower disposable income and lower customer loyalty may also make it harder for fintechs to scale.

Navigating an uncertain regulatory environment. Different countries evolve regulations at different paces. Generally, complex and variable regulations make it difficult for fintechs to ensure business continuity and compliance across markets.

Managing scarcity. Funding is slowing down for African fintechs after a record-breaking 2021. But fintechs can’t afford to slow down their progress, especially as incumbents begin catching up. This suggests African fintechs will have to tighten their belts to adjust to a new venture funding reality.

Building robust corporate-governance foundations. In a regulatory, socioeconomic, and political environment that can be uncertain and fragmented, a strong corporate-governance structure can provide stability, clarity, and direction, especially in times of difficulty. Strong corporate governance includes strong culture building, productive stakeholder engagement, and a clear talent strategy to build the organization’s capabilities.

We don’t predict the path ahead to be smooth. But if stakeholders can work together to build on the momentum of recent years, the prospects for African fintechs are good.

What’s the state of fintech in Europe?

Fintech in Europe was hit hard by COVID-19 and the resulting economic uncertainty. But in the long term, fintechs continue to gain in strength and relevance for customers and the economy. In each of the seven largest European economies, as measured by GDP, at least one fintech ranks among the top five banking institutions.

But fintech has not progressed in each European market at the same speed. There’s a wide divergence of maturity and performance among countries, with a substantial gap between the top one-third and the rest. Two countries in particular stand out for their superior fintech ecosystem performance: Sweden and the United Kingdom. If fintech ecosystems in all European countries were to perform as well as the best in the region, the upside would be substantial: the number of fintech jobs would grow to more than 364,000, the volume of funding would more than double to almost €150 billion, and valuations would balloon to almost €1 trillion.

Here are the ways in which fintechs can benefit European stakeholders:

The appeal of fintechs to European customers is that they offer superior service at lower costs. International transfers, for example, can cost just 10 percent of the rates charged by traditional banking service institutions.

Fintechs are a catalyst for disruptive innovation and growth in the financial ecosystem as a whole. They are typically more agile and quicker than incumbents, which means they are able to launch new products and services much faster (average time to market for fintechs is as little as two months, compared with 12 months for incumbents).

Fintechs are an important source of potential growth for the overall economy. As of 2022, fintechs have created approximately 134,000 jobs across Europe and represent a total valuation of almost €430 billion. That’s more than the combined market capitalization of Europe’s seven largest listed banks.

For the European financial system to achieve the potential made possible by fintech, stakeholders such as public institutions, incumbents, and fintech upstarts will need to combine their strengths by setting up appropriate enabling structures and mechanisms.

Learn more about McKinsey’s Financial Services Practice.

What’s the future of fintech in the Middle East, North Africa, and Pakistan?

Fintech has boomed in the Middle East, North Africa, and Pakistan (MENAP) in recent years: investor backing increased by around 36 percent annually from 2017 to 2022.

Here are five types of fintech companies in MENAP:

Homegrown fintech start-ups. Local fintech start-ups are addressing not only payments, lending, insurtech, and investments but also additional consumer and business needs such as home buying, payment apps and wallets, and merchant payment solutions.

International fintech firms. Established international fintech firms have launched in MENAP, stimulating competition and helping promote customer adoption.

Banks. Leading banking incumbents have moved quickly to offer digital-only offerings. These include Weyay Bank, a digital, youth-oriented bank by National Bank of Kuwait; Liv, a digital lifestyle banking app from Emirates National Bank of Dubai; and others.

Other nonbank financial institutions. Established payment processors, exchanges, remittance services, and other traditional infrastructure providers have launched mobile apps and digital portals. In some cases, they have partnered with fintech start-ups.

Cross-sector fintech firms. Large companies with leading market share, especially in telecommunications, have progressed from mobile cash to broader offerings such as mobile wallets, mobile payments, and branchless banking services.

While 2022 brought with it a global drop in fintech valuations, we believe the market in MENAP is likely to continue growing. By 2025, we estimate that fintech revenue in MENAP could be up to $4.5 billion.

Realizing this potential is another story. For fintechs to continue to expand their roles in the daily lives of consumers and businesses in MENAP, they’ll need to invest capital, work with regulators, and cultivate talent and partnerships.

Learn more about McKinsey’s Financial Services Practice. And check out fintech-related job opportunities if you’re interested in working at McKinsey.

Articles referenced:

“Fintechs: A new paradigm of growth,” October 24, 2023, Lindsay Anan, Diego Castellanos Isaza, Fernando Figueiredo, Max Flötotto, André Jerenz, Alexis Krivkovich, Marie-Claude Nadeau, Tunde Olanrewaju, Zaccaria Orlando, and Alessia Vassallo

“On the cusp of the next payments era: Future opportunities for banks,” September 18, 2023, Luca Bionducci, Alessio Botta, Philip Bruno, Olivier Denecker, Carolyne Gathinji, Reema Jain, Marie-Claude Nadeau, and Bharath Sattanathan

“Fintech in MENAP: A solid foundation for growth,” May 24, 2023, Max Flötotto, Sheinal Jayantilal, Sagar Shah, Rinki Singhvi, and Sonia Wedrychowicz

“Banks’ core technology conundrum reaches an inflection point,” February 15, 2023, Paul Taylor and Brian Ledbetter

“Europe’s fintech opportunity,” October 26, 2022, Alessio Botta, Sarina Deuble, Constance Emmanuelli, Fernando Figueiredo, Max Flötotto, Christian Irlbeck, André Jerenz, Timo Mauerhoefer, Tunde Olanrewaju, Alessia Vassallo, Stefanie Vielmeier, and Eckart Windhagen

“Fintech in Africa: The end of the beginning,” August 30, 2022, Max Flötotto, Eitan Gold, Uzayr Jeenah, Mayowa Kuyoro, and Tunde Olanrewaju

“Financial services unchained: The ongoing rise of open financial data,” July 11, 2021, Chandana Asif, Tunde Olanrewaju, Hiro Sayama, and Ahalya Vijayasrinivasan

“What the embedded-finance and banking-as-a-service trends mean for financial services,” March 1, 2021, Zac Townsend

“Harnessing Nigeria’s fintech potential,” September 23, 2020, Topsy Kola-Oyeneyin, Mayowa Kuyoro, and Tunde Olanrewaju

“Detour: An altered path to profit for European fintechs,” September 9, 2020, Chandana Asif, Max Flötotto, Tunde Olanrewaju, and Giuseppe Sofo

“Seven ways for financial institutions to react to financial-technology companies,” July 27, 2020, Alexis Krivkovich and Zac Townsend

“Scanning the fintech landscape: 10 disruptive models,” May 8, 2019, Zac Townsend

Want to know more about fintech?Talk to usRelated ArticlesReportFintechs: A new paradigm of growthReportOn the cusp of the next payments era: Future opportunities for banksPodcastBanks’ core technology conundrum reaches an inflection po

Seven technologies shaping the future of fintech | McKinsey

n technologies shaping the future of fintech | McKinsey

Skip to main contentSeven technologies shaping the future of fintechNovember 9, 2021 Dick Fong Feng Han Louis Liu John Qu Arthur ShekIn the next 10 years, seven key technologies will drive business model reinventions while shaping the competitive landscape of the financial industry.Technological progress and innovation are the linchpins of fintech development, and will continue to drive disruptive business models in financial services. According to McKinsey analysis, seven key technologies will drive fintech development and shape the competitive landscape of finance over the next decade:

1. Artificial intelligence will drive massive value creation

McKinsey estimates that artificial intelligence (AI) can generate up to $1 trillion additional value for the global banking industry annually. Banks and other financial institutions are tipped to adopt an AI-first mindset that will better prepare them to resist encroachment onto their territory by expanding technology firms.

In financial services, automatic factor discovery, or the machine-based identification of the elements that drive outperformance, will become more prevalent, helping to hone financial modeling across the sector. As a key application of AI semantic representation, knowledge graphs and graph computing will also play a greater role. Their ability to assist in building associations and identifying patterns across complex financial networks, drawing on a wide range of often disparate data sources, will have far-reaching implications in the years to come.

Finally, analytics that incorporate enhanced privacy protections will foster minimal data usage, or the use of only relevant, necessary and appropriately sanitized information, in the training of financial models. These include federated learning, a form of decentralized machine learning that addresses the risk to privacy associated with centralizing datasets by bringing the computational power to the data, rather than vice versa. Advanced encryption, secure multi-party computing, zero-knowledge proofs, and other privacy-aware data analysis tools will drive a new frontier in consumer protection.

AI applications will penetrate the entire spectrum of financial industry operations across front, middle, and back offices. Customer-facing applications include tailored products, personalized user experience and analytics services, intelligent service robots and chat interfaces, market trackers, automated transactions and robo-advisors, as well as alternative credit ratings based on non- financial data, and facial recognition authentication. Middle-and-back office applications include smart processes, enhanced knowledge representation tools (epitomized by knowledge graphs), and natural language processing for fraud detection.

Many financial institutions still use AI in a sporadic and scattered way, often only applying the technology to specific use cases or verticals. But bank industry leaders are transforming their operations by systemically deploying AI across the entire lifecycle of their digital operations. Notably, the financial industry is coming to realize that algorithms are only as good as their data. Attention is turning to gaining competitive advantage from previously under-used customer behavior data collected via conventional operations. This will unlock the hitherto untapped potential of ecosystem-based financing, in which banks, insurers and other financial services firms partner with non-financial players to facilitate seamless customer experiences in areas outside their traditional remit.

For banks, the “AI-first” institution will yield greater operational efficiency via the extreme automation of manual tasks (a “zero-ops” mindset), and the replacement or augmentation of human decisions by advanced diagnostics. Improved operational performance will flow from the broad application of traditional and cutting-edge AI technologies, such as machine learning and facial recognition, to (near) real-time analysis of large and complex customer data sets. “AI-first” banks of the future will also adopt the speed and agility enjoyed by “digital native” companies and users. They will innovate at a rapid clip, releasing new features in days and weeks instead of months and years. Banks will also collaborate extensively with non-bank partners to offer new value propositions that are integrated across journeys, technology platforms, and data sets.

2. Blockchain will disrupt established financial protocols

Distributed Ledger Technology (DLT) allows the recording and sharing of data across multiple data stores, and for transactions and data to be recorded, shared, and synchronized across a distributed network of participants at the same time.

Some DTLs use blockchains to store and transmit their data, as well as cryptographic and algorithmic methods to record and synchronize the data across the network in an immutable manner.

DTL will increasingly underpin ecosystem financing by allowing the storage of financial transactions in multiple places at once. Increasingly, cross-chain technology, will facilitate blockchain interoperability, allowing chains established on different protocols to share and transmit data and value across tasks and industries, including payments processing and supply chain management.

Technologies such as smart contracts, zero- knowledge proof, and distributed data storage and exchange, which are key to existing fintech innovations such as digital wallets, digital assets, decentralized finance (DeFi), and non-fungible tokens (NFT), will continue to play a prominent role.

Moreover, traditional stakeholders, including institutional investors and funds, are gradually increasing the share of digital assets in their portfolios, broadening access to financing and elevating the potential of blockchain and DTL to disrupt established markets. For example, decentralized finance (DeFi), a form of blockchain- based finance that uses smart contracts to remove the need for a central intermediary, is taking off. The total locked-up value (TLV) of DeFi has surged by nearly 50 times in the past 10 months, with the sector now holding digital assets worth $2.1 trillion. The fact that digital asset exchanges earned about $15 billion in revenue in 2021 offers a further indication of blockchain’s mounting technological value.

DLT is also making a mark on government policymaking and regulation. According to a survey conducted by the Bank for International Settlements (BIS) in early 2021, about 60 percent of central banks said that they are testing or studying Central Bank Digital Currency (CBDC). The People’s Bank of China, for instance, has begun operational trials of a digital RMB effort based on permissioned DTL, paving the way for improved oversight of monetary policy and resource allocation at the macro level.

Other blockchain applications worthy of mention include:

Real-time transaction settlement: Banks are using smart contracts to settle the collateral and cash part of a transaction at the same Transaction processing, securities lending, and equity trades can also be settled on the blockchain to improve the efficiency and scalability of cross-border sales. Meanwhile, trading securities supported by digital collateral on the blockchain makes for more efficient, transparent, and secure capital management, as well as post-transaction equity settlement.

Digital asset support services: Institutional investors are seeking DLT capabilities, including tokenization for unlisted companies or private equity funds, spot exchange between established currencies and cryptocurrencies ondigital exchanges, and custody services such as key escrow encryption on behalf of customers.

Authentication ecosystems based on zero- knowledge proof: Customers are using agreed- to-share information from partner institutions to verify their identity online, face-to-face, or through phone calls, simplifying authentication procedures and offering streamlined access to health records and government services. Only information required for each specific transaction is shared, while all other data remains safely on the server of the trusted provider.

Decentralized finance (DeFi): Decentralized non-custodial applications can replace intermediaries by automatically generating deterministic (or “always valid”) This makes it possible to obtain loans, make investments, or trade financial products without relying on financial entities under centralized management. DeFi adopts deterministic smart contracts, which eliminate counterparty risks and cut out the costs associated with rent- seeking intermediaries, while improving market efficiency with real-time transparency.

DeFi based on blockchain technology is ushering in a new era of opportunity, disrupting established traditional value chains and structures. As financial policies and regulations adapt, DeFi is set to massively expand.

3. Cloud computing will liberate financial services players

McKinsey research shows that by 2030, cloud technology will account for EBITDA (earnings before interest, tax, depreciation and amortization) in excess of $1 trillion across the world’s top 500 companies. Our research shows that effective use of the cloud can increase the efficiency of migrated application development and maintenance by 38 percent; raise infrastructure cost efficiency by 29 percent; and reduce migrated applications’ downtime by ~57 percent, thus lowering costs associated with technical violations by 26 percent. At the same time, cloud can improve platform integrity through automated and embedded security processes and controls. Development, Security and Operations (DevSecOps), or the idea that security is a responsibility that can be actioned across an organization in step with the growth of its development and operations, is a primary example of a cloud-based feature that reduces technical risks through a consistent, cross-environmental technology stack.2

Financial institutions should be aware of three major forms of cloud services: public cloud, hybrid cloud, and private cloud. Public cloud means that the infrastructure is owned by cloud computing service providers, who sell cloud services to a wide range of organizations or the public. Hybrid cloud infrastructure is composed of two or more types of cloud (private, public) that are maintained independently, but connected by proprietary technology. Private cloud means that the infrastructure is built for an individual customer’s exclusive use, deployable in the company data centers, or via other hosting facilities.

Looking ahead, we have identified several relevant cloud-computing trends:

Edge computing and edge cloud are essential: Partition and development logic based on the relationship between edge devices, data centers, and the cloud is increasingly recognized in multiple Development of the edge cloud is accelerating as 5G communication drives new interactions and synergy across the internet of things (IoT), cloud computing, AI and other technologies in areas like new retail, healthcare, industrial parks, smart cities, and industrial IoT.

Cloud containers are stimulating innovation. Public cloud providers are actively pushing the implementation of container technology on cloud, allowing multiple workloads to run on a single operating system instance, and so reducing overheads and improving efficiency. This is driving innovation of cloud delivery models on the platform as a service (PaaS) layer. Cloud technology providers will increasingly focus on building platforms that incorporate container as a service (CaaS).

AI-cloud integration is on the rise: AI-cloud platform applications are proliferating in fields like image and audio search, driving advances in high-value areas such as medical image Deep learning will continue to improve services for a broader range of users via cloud platforms.

Cloud computing liberates financial companies from non-core businesses such as IT infrastructure and data centers, while enabling access to flexible storage and computing services at a lower cost. At the same time, the cloud is spawning new formats such as open banking and banking-as-a-service, shaking up the age-old relationship between customers and financial service providers.

Financial institutions will continue to rely on the cloud as they onboard more agile capabilities, and launch new businesses that require high responsiveness to market and customers, and flexible scalability. Meanwhile, the at-scale application of big data analytics will boost demand for cloud-based elastic computing, which allows computing resources to be dynamically adjusted to meet shifts in demand.

Banks will also recognize the potential to adopt cloud-based microservice architecture at scale in the next few years, where application programming interfaces (APIs) unlock machine- to-machine communication, and allow services to scale independently without needing to enlarge the coding base of the overall offering. The next generation of core banking applications will spur a microservice-driven architectural transformation in banking.

4. IoT will drive a new era of trust in finance

After years languishing on the lower slopes of the hype cycle, IoT is finally coming of age, with important ramifications for financial IoT systems are composed of three layers – perception and smart sensor systems, wireless communication networks, and application and operations support. On the sensor front, RFID labeling still has broad untapped potential to automate item identification and logistics management. IoT communication solutions are also expanding, casting a wider net for devices to communicate across wired and wireless networks, near-field communication solutions, low-power wide area networks, narrow-band IOT, connected end-point devices, and centralized control management. Finally, embedded-system and smart technologies are developing fast, enabling more intelligent communication with objects.

From the financial applications perspective, consider the fact that environmental, social, and corporate governance (ESG) considerations now govern many investment strategies and regulatory policies. For instance, several major countries have committed to achieving peak carbon emissions and carbon neutrality. Aside from broader use of renewable energy, success in achieving these goals will be predicated on the effective monitoring and management of industrial energy and power efficiency. This presents a perfect scenario for IoT applications. Carbon trading, for example, will be increasingly indexed to IoT measurements, opening new opportunities for astute players.

Meanwhile, insurers are using IoT to more accurately determine risk, while improving customer engagement and accelerating and simplifying the underwriting and claims process. Auto insurers, for example, have historically relied on indirect indicators to set premiums, such as the age, address, and creditworthiness of a driver. Now, data on driver behavior and the use of a vehicle, such as car speed and frequency of driving at night, are available thanks to IoT. The technology allows insurers to interact with customers more frequently, and offer new services based on the accumulated data. The sector is also ripe for efficiency gains, as customers often engage exclusively with agents or brokers; and only directly contact the insurer for policy renewal or claims handling. IoT can deliver benefits in the management of customer relationships, allowing insurers to establish more intensive and targeted customer contact.

In banking, IoT-based inventory and property financing, involving the integration of IoT and blockchain, is refining risk management by ensuring that accounting records match real-world transactions, facilitating a brand new system of trust. In shipping and logistics, IoT is shaking up traditional trade finance, allowing banks to develop new products based on goods flow tracking, such as on-demand liquidity, and other innovations delivered via smart contracts. Embedding banking services into wearables, for example digital payments, is another scenario under which IoT is bringing banks closer to their customers.

5. Open source, SaaS and serverless will lower barriers to entry

Speed and scalability are critical for new businesses and financial innovation, particularly amid the intense competition and winner-takes-all dynamics of the digital economy. Open source software, serverless architecture, and software-as-a-service (SaaS) have become must-haves for technology players and traditional financial institutions launching new fintech businesses.

SaaS allows companies to use software as needed without having to own or maintain it themselves, while serverless architecture removes the need for firms to run their own servers, freeing up time and resources for customers and operations. Serverless architecture also reduces cost because charges are linked to executed software code, and are not generated round-the-clock, regardless of business need. It also fosters flexible scaling that avoids idling and loss, improving development efficiency. Open source software is a godsend for companies looking to scale rapidly as it provides free-to-use source code that gives developers a head start in programming their own applications. In 2019, Quantum Black, McKinsey’s analytics firm, released Kedro, an open-source tool for data scientists and engineers to create data pipelines, for example.

Each technology is value-generating in its own right, but they are most advantageous when used in combination; companies can quickly scale infrastructure, and develop and launch prototypes at low cost. However, traditional finance companies face significant challenges in leveraging the technologies across IT organizational structures, development skills, and risk management capabilities. They will need to rethink their IT strategy, putting rapid response IT capabilities at the top of their fintech innovation agenda.

6. No-code and low-code will redefine application development

No-code development platforms (NCDPs), and their close relation low-code platforms, allow programmers and general users to develop applications through graphical user interfaces and configurations (e.g. drag-and-drop) instead of traditional computer programming. While still relatively immature, the platforms can reduce the need to hire scarce and expensive software talent.

From a technical point of view, NCDP is the combination and application of component reuse and assembly in software engineering, DSL (domain specific language), visual fast development tools, customizable workflow process orchestration, and design thinking. NCDP development is closely linked to the advance of cloud computing, DevOps, and other technologies that solve problems such as containerization, inflexible scaling, and maintaining high availability computing environments.

Companies often use NCDPs to accelerate the development of cloud-based applications while keeping business strategy synchronized. For example, as audit trails and document generation can be automated on no-code or low-code platforms, compliance can be maintained and improved. This is of great help for financial institutions and fintech companies that need to quickly respond to market shifts.

Google Cloud has invested in no-code software platform Unqork, and acquired AppSheet – one of the largest players in the low-code and no-code software market. Both services allow general staff to develop applications without having specialized coding skills. Alex Schmelkin, Unqork’s Chief Marketing Officer, said that tasks that previously took years for financial services companies to complete can now be done within a few months after going “no-code”. Unqork currently has about 100 programmers, mainly focusing on financial services. No-code or low-code development platforms have the potential to liberate vital R&D resources to work on multiple projects at once, giving traditional financial institutions the advantage they need to compete with fintech start-ups, even as they pursue company-wide digital transformation projects.

7. Hyper automation will replace manual work Hyper automation refers to the introduction of AI, deep learning, event-driven software, Robotic

Process Automation (RPA), and other technologies and tools that improve decision-making efficiency and work automation capabilities.

RPA, which makes it easy for companies to deploy software robots such as chatbots at scale, is already a major component of digital transformation, but technology is constantly enlarging its boundaries. RPA’s core function is to allocate the handling of workflow information and business interactions to robots, thereby automating and standardizing business execution. High repeatability, clear logic, and solid stability are the key criteria to validate RPA tech feasibility. In future, RPA will become more deeply integrated with AI, improving its effectiveness in dealing with more complex business scenarios, and further streamlining financial service provision.

RPA is already at work across middle and back- office operations, automating financial processes and accounting reconciliation for financial institutions. Areas where RPA is being deployed include process automation for accounts receivable and payable, fund appropriation at shared finance and accounting service centers, work hour adjustment and review, automation of financial recording, reporting and treasury processes, and period-end accounting and settlement.

Replacing manual work with automation not only improves efficiency, but also reduces human errors, and allows businesses to respond to fluctuations in demand. While already well established among leading financial players, we expect RPA to penetrate more deeply throughout the industry. Accounts payable processes, for instance, have the potential to be 60 percent automated using robots that mirror human actions for basic paperwork and decision-making.

Unlocking future competitiveness

These key technologies and trends are becoming increasingly intertwined and integrated, giving massive impetus to fintech and financial industry innovation. As it stands, it is niche financial

sub-sectors that are most adept at harnessing technological innovations to launch applications, generate value, and shape the competitive landscape. In future, traditional financial institutions will need to bring their considerable resources to bear to stay on top of the gathering wave of financial industry disruption.Dick Fong is a partner in McKinsey’s Hong Kong office; Feng Han is a partner in Shenzhen; Louis Liu is a senior engagement manager in Beijing; John Qu is a senior partner in Hong Kong, where Arthur Shek is a partner.Explore a career with usSearch Openi

What Is Fintech? Financial Technology Definition | Built In

Is Fintech? Financial Technology Definition | Built In Skip to main content Fintech.What Is Fintech? Financial Technology DefinitionWritten bySam DaleyUPDATED BYHal Koss | Sep. 02, 2022REVIEWED BYChris LiquinWhat Is Fintech? A Quick DefinitionFintech, a combination of the terms “financial” and “technology,” is the application of new technological advancements to products and services in the financial industry. Our guide will walk you through what fintech is and how it’s used.Fintech DefinitionFintech Examples and UsesFintech DefinitionImage: Shutterstock / Built InWhat Is Fintech?Fintech, a combination of the terms “financial” and “technology,” refers to businesses that use technology to enhance or automate financial services and processes. The term encompasses a rapidly growing industry that serves the interests of both consumers and businesses in multiple ways. From mobile banking and insurance to cryptocurrency and investment apps, fintech has a seemingly endless array of applications.What Is Fintech?Fintech refers to the application of software and hardware to financial services and processes, making them faster, easier to use and more secure. The fintech industry includes everything from payment processing solutions to mobile banking apps.Today, the fintech industry is huge. And if recent venture capital investments in fintech startups — which reached an all-time high in 2021 — can be considered a vote of confidence, the industry will continue to expand for years to come.One driving factor is that many traditional banks are supporters and adopters of newfangled fintech, actively investing in, acquiring or partnering with fintech startups. Those are ways for established banking institutions to give digitally minded customers what they want, while also moving the industry forward and staying relevant. How Does Fintech Work?The inner workings of financial technology products and services vary. Some of the newest advancements utilize machine learning algorithms, blockchain and data science to do everything from process credit risks to run hedge funds. There’s even an entire subset of regulatory technology dubbed regtech, designed to navigate the complex world of compliance and regulatory issues of industries like — you guessed it — fintech.As fintech has grown, so have concerns regarding cybersecurity in the fintech industry. The massive growth of fintech companies and marketplaces on a global scale has led to increased exposure of vulnerabilities in fintech infrastructure while making it a target for cybercriminal attacks. Luckily, technology continues to evolve to minimize existing fraud risks and mitigate threats that continue to emerge.An error occurred.Unable to execute JavaScript. Try watching this video on www.youtube.com, or enable JavaScript if it is disabled in your browser.What is fintech? | Video: CNBC InternationalFintech Examples and UsesImage: shutterstock / Built InThough the fintech industry conjures up images of emerging startups and disruptive technology, traditional banks and financial institutions are in the game now too, adopting fintech services for their own purposes. Here’s a quick look at some examples of how the industry is enhancing and evolving some areas of finance. Types of Fintech CompaniesTypes of Fintech Startups and CompaniesConsumer banking and investingMobile paymentsInsurance techDigital lending and leasingBudgeting apps Mobile Banking and NeobanksMobile banking is the central focus of many finance technology companies. In the world of personal finance, consumers have increasingly demanded easy access to their bank accounts, especially on a mobile device. Most major banks now offer some kind of mobile banking feature, especially with the rise of digital-first banks, or neobanks. Neobanks are essentially banks without any physical branch locations, serving customers with checking, savings, payment services and loans on completely mobile and digital infrastructure. Some banks also allow third-party software applications to access a user’s financial information, which is called open banking. Some examples of fintech banks or neobanks are Chime, Current, Aspiration and Varo. Cryptocurrency FintechCryptocurrency and blockchain intersect with fintech in a number of ways. For starters, several crypto trading platforms have emerged in recent years that allow users to trade different kinds of cryptocurrencies and take advantage of decentralized exchanges. And to keep people’s digital currency safe, a number of crypto wallets have sprung up as well. In addition, several fintech companies use blockchain technology for payment processing, money transfer and secure digital identity management. Some examples of cryptocurrency fintech companies include Coinbase, Blockfi and SALT. Fintech Investment and SavingsFintech has caused an explosion in the number of investing and savings apps in recent years. More than ever, the barriers to investing are being broken down by companies like Robinhood, Stash and Acorns. While these apps differ in approach, each uses a combination of savings and automated small-dollar investing methods, such as instant round-up deposits on purchases, to introduce consumers to the markets. Machine Learning and TradingBeing able to predict where markets are headed is the Holy Grail of finance. With billions of dollars to be made, it’s no surprise that machine learning has played an increasingly important role in fintech — and in trading specifically. The power of this AI subset in finance lies in its ability to run massive amounts of data through algorithms designed to spot trends and risks, allowing consumers, companies, banks and additional organizations to have a more informed understanding of investment and purchasing risks earlier on in the process. Payment FintechMoving money around is something fintech is very good at. The phrase “I’ll Venmo you” or “I’ll CashApp you” is now a replacement for “I’ll pay you later.” These are, of course, go-to mobile payment platforms. Payment companies have changed the way we all do business. It’s easier than ever to send money digitally anywhere in the world. In addition to Venmo and Cash App, popular payment companies include Zelle, Paypal, Stripe and Square. Fintech LendingFintech is also overhauling credit by streamlining risk assessment, speeding up approval processes and making access easier. Billions of people around the world can now apply for a loan on their mobile devices, and new data points and risk modeling capabilities are expanding credit to underserved populations. Additionally, consumers can request credit reports multiple times a year without dinging their score, making the entire backend of the lending world more transparent for everyone. Within the fintech lending space, some companies worth noting include Tala, Petal and Credit Karma. Insurtech — Insurance FintechWhile insurtech is quickly becoming its own industry, it still falls under the umbrella of fintech. Insurance is a somewhat slow adopter of technology, and many fintech startups are partnering with traditional insurance companies to help automate processes and expand coverage. From mobile car insurance to wearables for health insurance, the industry is staring down tons of innovation. Some insurtech companies to keep an eye on include Lemonade, Kin and Insurify. Fintech TrendsFintech is not a new industry, it’s just one that has evolved very quickly. Technology has, to some degree, always been part of the financial world — whether it’s the introduction of credit cards or ATMs, electronic trading floors, personal finance apps and high-frequency trading in the decades that followed.Over the past decade, though, the fintech industry has seen accelerated growth — and fintech innovations are likely to only advance from here.Some fintech trends to keep an eye on include: Digital WalletsDigital wallets, like Apple Pay and Google Pay, allows people to store their payment information in a mobile app, and then use that app when it comes time to pay for something. While digital wallets have been around for years, their usage is still on the rise. Blockchain in FintechBlockchain — a public ledger capable of recording the ownership, origin and movement of digital assets — will continue to impact the financial industry. For starters, the ledger technology and proliferation of smart contracts will greatly help with making the industry more secure and efficient. Embedded FinanceEmbedded finance is the term for when a non-financial business integrates fintech tools into its point of service. Examples include payment processing terminals at coffee shops and buy-now-pay-later buttons on e-commerce store checkouts. This integrated finance stack makes for a smoother, more-flexible experience for customers — and we’re likely to see it more and more in the days ahead. Serving Traditionally Underserved PopulationsThe overarching promise of fintech is that technology makes it easier to provide financial services to people who historically have had little or no access to them. Indeed, several fintech companies aim to eliminate long-standing barriers so that people — typically younger people and people of color — can more easily save, invest and build wealth for themselves. 110 Fintech Companies and Startups to Keep in Your Back PocketThese 58 innovative companies are revolutionizing the fintech space. Read Article 21 Fintech Companies in India to Know More StoriesBack to Top What Is an Effective Savings Rate, and How Do I Track It? Read Article Black Tech Unicorns Are Rare. Here’s How to Change That. A Bank with a Tech Heart: How Innovation is the Driving Force Behind Capital One Why These Tech Professionals Commit to Careers at FirstBank People First: How Balance, Connection and Growth Power ‘The Wipfli Way’ Why the Tech Sector Is Poised to Weather Economic Headwinds Read Article What Is Embedded Finance? What Is a Rug Pull, Exactly? 8 Top Digital Payment Companies 50 Insurtech Companies Making Coverage Simpler 110 Fintech Companies and Startups to Keep in Your Back PocketThese 58 innovative companies are revolutionizing the fintech space. Read Article Fintech Banking: 19 Fintech Banks and Neobanks to Know Continue ReadingHow AI Trading Technology Works for Stock Investors 33 Examples of AI in Finance45 Fintech Lending Companies Upending the Credit Card, Mortgage and Loan IndustriesWalmart Is the Future of BankingHow Fintech Is Poised for Transformation18 Regtech Companies Reshaping FinanceHigh-Frequency Trading Explained: What Is It and How Do You Get Started?22 Crypto Apps to KnowWhat Is a Central Bank Digital Currency (CBDC)? New Identity, Same Mission: What This Fintech Wants To ‘Achieve’ With Its Recent Rebrand Regtech: What It Is and Why It’s Growing8 Crypto Loan Companies Using Blockchain for Lending Smart Contracts in Blockchain: What They Are, How They WorkStudent Loan Forgiveness: These 3 Fintechs Are Helping Borrowers Navigate Biden’s New PlanWhat’s the Deal With CryptoPunks?20 Popular Altcoins to KnowFor the Unbanked and Underbanked, Is Fintech a Solution?14 Stablecoins to KnowBlockchain in Finance: What It Is and How It’s Used16 Blockchain Banking Examples to Know15 AI in Banking Examples You Should KnowA Guide to E-WalletsIoT In Fintech: 11 Examples You Should KnowMore Crypto Regulation May Be Inevitable20 Crypto ETFs to KnowFor Fintechs, Leveraging an External Data Platform Can Supercharge Innovation20 Best Crypto Wallets to KnowIs It Time to Burst the Buy Now, Pay Later Bubble? The Challenges (and Opportunities) of Data Science in Finance11 In-Demand Fintech JobsFintech Engineers Are Bringing Modern Technologies to a Legacy IndustryCrypto and NFTs Are Just the Beginning of the Alternative Investments BoomVaynerNFT’s Head of Strategy: An Executive’s Guide to NFTsWhat Is Alternative Data and Why Is It Changing Finance?Behind the Scenes of 3 SoFi Fintech Products 13 Fintech Companies in Washington, D.C. Shifting the Nation's Financial Focus18 Houston Fintech Companies to Know18 Dallas Fintech Companies Reshaping the Nation’s Financial LandscapeWhat Do Loan Officers and Homebuyers Want? A Simpler Mortgage Industry.Why 2022 Is the Year Neat Loans Becomes a ‘Household Name’This Auto Insurtech Company is Speeding — in a Good WayHow Rapper IDK’s Credit Score Is So HighCrypto Hubs Are Booming. Here’s Where to Find Them.Machine Learning in Finance: 13 Companies to Know27 Fintech Companies in Atlanta You Should KnowHow These Fintech Companies Are Pushing the Next Wave of Innovation7 Predictions for the Future of Financial ServicesWhat We Don’t Know About Bitcoin — and Why It’s a ProblemHow to Catalyze Diversity in FintechIs Your Startup Guilty of Shoddy Legal Analysis?9 Fintech Companies in San Diego Keeping Us Money Smart10 Philadelphia Financial Tech Companies Making Us Smarter With Our WalletsThese Are the Trends and Technologies Top Credit Card Companies Are WatchingWhy COBOL Has Stuck Around for All These YearsWhat Is a Robo-Advisor? How Do They Work?Finding Fintech Accelerators in Unlikely PlacesHackers Are Breaking Into Credit Union Accounts. One Solution? Blockchain.In a Strong Economy, Financial Instability Persists — but Tech Could HelpThese Are the Fintech Trends to Watch, According to 13 ExpertsFintech Recruitment: What You Need to KnowMachine Learning for Smarter Trading: 14 Companies You Should Know11 Robotics Applications in Banking and Finance13 Companies Using Blockchain in Trading$200 million Series D round makes Chime a fintech unicornCiti rolls out digital payments app PayAll in AsiaPhiladelphia bans cashless stores in U.S. major city firstHSBC partners with fintech startup NepFin to serve middle market businessesArgentina's Wilobank uses smartphone tech to reach the unbankedFintech drives record highs in the unsecured personal loan market Goldman invests in construction fintech startup RabbetMexico plans state-run mobile banking solutionDigital payments could become $100 trillion market, says PayPal CEOSoFi to enable crypto trading through Coinbase partnershipRobo-advisor Wealthfront rolls cash accountsAnt Financial buys remittances firm WorldFirst for estimated $700mSMB lender OakNorth secures $440 million in fundingOpen banking startup Tink raises $64 millionStep's banking solution focuses on children and young adultsARK Investment Management launches fintech-focused exchange traded fundCredit card issuer Petal sees opportunity in an overlooked marketOpen banking tech startup Bud raises over $20 millionBetter Mortgage raises $70 million to digitize homebuyingGerman fintech startup Raisin raises $114 millionFintech on a quest to boost commercial card adoption in FranceVenmo's payment volume reached $19 billion in the fourth quarter last yearStandard Chartered continues digital bank rollout in AfricaClimb secures $50 million debt facility from Goldman SachsRevolut is building a global licensing teamStripe raises $100 million from Tiger Global ManagementFintech app Acorns raises funding from NBCUniversal and Comcast Ventures, inks content deal with CNBCFintech companies raise a record total of venture capital fundingFinxact, back-end technology provider for banks, raises $30 millionPrisma Medios de Pago becomes Latin America's newest fintech unicornFintech should embrace banks, say Mastercard and PayPal execsMarketInvoice raises £56 million in Series B fundingFlutterwave & Visa partner to power consumer payments in AfricaDigital bank Tandem forecasts an IPO within the next 5 yearsFinastra CEO: U.S. banks more keen on fintech than U.K. counterpartsKey Bank set to acquire Laurel Road's digital lending servicesTencent launches rating system WeChat Payments Score Open Banking gaining ground in the U.K.Square launches the Square Card, a debit card for businessesHigh-yielding savings accounts beat the stock market in 2018Fed still skeptical of granting fintech companies greater accessFintech giants Fiserv and First Data announce $22 billion mergerAlibaba partners with Kabbage for point of sale financingTransferWise applies for Brussels license, bracing for Brexit U.S. Bank subsidiary Elavon acquires B2B payments company CenPOSFintech is feeling effects of government shutdownFintech firm Plaid buys B2B counterpart QuovoGerman fintech unicorn N26 raises over $500 millionSteady and Betterment partner to offer financial tools to gig workersU.K. challenger bank Monzo appears poised for a U.S. launchRide-hailing app Didi Chuxing makes bold bet on financial servicesPeer-to-peer lending clampdown underway in ChinaGoogle Payment receives e-money license in Lithuania for EU operationsMobile payment users may struggle with financial literacy, says studyRates on Goldman Sachs' Marcus account are going upRobinhood may be stealthily planning for UK launchVisa acquires fintech startup Earthport for $250.6 millionFacebook may be quietly developing cryptocurrency for WhatsAppSenators demand answers after Robinhood’s misstepRobo-advisers settle charges with the SECBiweekly payroll is a relic of the past, says Gusto CEOMorgan Stanley speeds up onboarding to win over fintech startupsCitigroup partners with fraud detection startup FeedzaiSquare reapplies for banking licenseSouth Africa-based JUMO delivers fintech solutions to the unbankedMajor financial institutions invest $17.5 million in risk management startupVisa launches partnership to enable push-to-card paymentsFintech startup ZestFinance to deliver AI-powered tools for Microsoft customersU.K. fintech firm Revolut gets European banking licenseNigerian fintech startup secures crucial credit ratingMorgan Stanley partners with Yext to power online presence for advisorsMeet Toss, South Korea's first fintech unicornUK P2P lender Zopa granted license to open digital bankMove over, loonies: Calgary, Alberta now accepts digital dollarsTD Ameritrade launches mini program in Chinese messaging app WeChatGreat Companies Need Great People. 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Fintech

Fintech is changing the landscape of investment management with implications in career choices and decision-making models for those in the finance industry.

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What Is Fintech?

Fintech, or financial technology, refers to the technological innovation in the design and delivery of financial services and products. Technology in finance continues to evolve; advancements include the use of Big Data, artificial intelligence (AI), and machine learning to evaluate investment opportunities, optimize portfolios, and mitigate risks.

Increasingly focused on customer outcomes, the desired outcome of fintech is the ability to provide tailored, actionable advice to investors with greater ease of access and at lower cost.

Fintech Careers

Popular careers in fintech include more general technology careers, such as cybersecurity and AI, and those increasingly more pertinent to the asset management industry: blockchain development and quantitative analysis. A fintech career path requires a strong focus on computer science, programming, mathematics, and data science, in addition to a firm understanding of the financial market, including financial instruments and products.

Popular roles associated with fintech include data scientist, research analyst, software developer, data visualizer, machine learning expert, database architect, and system administrator.

Financial firms and practitioners must position themselves for industry transformation, including leveraging the benefits of both human and artificial intelligence. Recognizing the significant impact of fintech currently and on the future direction of the asset management industry—including trading, private wealth, and quantitative methods—CFA Institute has incorporated fintech topics into the CFA Program curriculum. Topics include AI, machine learning, algorithmic trading, data science, blockchain, and robo-advising

Investment Professional of the Future

This Future of Finance report presents investment professionals with a roadmap to career success, including the types of roles that will come with the rapid growth of fintech in the industry.

How to Get into Fintech

Understand and develop the skills needed

Apply for a job with a financial data provider

Supplement technical skills with knowledge of the finance industry

As a practice, fintech innovations rely on the twin foundations of the data science discipline and finance expertise, such as the fundamental knowledge in investment analysis offered by CFA Program. Although the industry depends on highly specialized roles, such as machine learning and data engineers, domain expertise in finance — supplemented by fintech knowledge — can help practitioners better compete in an evolving industry.

The CFA Program includes fintech topics, and earning the designation demonstrates not only a firm understanding of the finance industry, but also fundamental knowledge of the applications of fintech, including data science, to investment management. With supplementary fintech study and application, CFA charterholders may be well poised pursue a career in fintech with their robust understanding of the finance industry and the connections made through CFA Institute membership.

Fintech and Asset Management

With fintech innovations, firms can better meet customer needs and expectations. With clear benefits, fintech is quickly changing the landscape of investment management. Advancements include the use of robo-advisers, Big Data, AI, and machine learning to evaluate investment opportunities, optimize portfolios, and mitigate risks. In the area of financial recordkeeping, blockchain and distributed ledger technology are creating new ways to record, track, and store transactions for financial assets.

Investors of all ages and from all regions want more technology applied to investing, and trust in technology is generally high. The effective use of technology increases trust in a financial adviser or firm, and new blockchain technology holds the promise of creating more trust in the system.

Fintech Trends in Asset Management

Investment professionals and firms have entered a period of accelerating transformation. From rapidly evolving technology to fundamental demographic shifts, multiple trends are converging to drive significant changes in how people and firms will operate in the finance industry.

Trends in Financial Technology

Artificial Intelligence (AI) in Fintech

AI is having a major impact on the finance industry as part of fintech. AI is being used to analyze investment opportunities, optimize portfolios, and mitigate risks, among many other functions, but the applications go well beyond the investment decision-making process. For example, automated wealth advisers (or “robo-advisers”) may assist investors without the need for a human adviser, or they may be used in combination with a human adviser. The desired outcome is the ability to provide tailored, actionable advice to investors with greater ease of access and at lower cost.

Machine Learning in Finance

Machine learning plays a key role in the expanding use of fintech throughout the finance industry. The general term “machine learning” includes a variety of methods that use advanced techniques to find patterns in extremely large amounts of data. These technologies are able to perform such tasks by “learning” from known examples and applying them to new information without human intervention. A recent survey of CFA Institute members identified machine learning as one of the leading drivers of change that will affect investment professionals.

Blockchain Technology in Finance

Blockchain is a special type of database technology that allows all the participants in a transaction to see the same data at the same time. Blockchain is changing the way business is done in the investment industry and has the potential to boost trust in the system by improving transparency. Crypto assets, a related technology, are issued, transferred, and settled on a blockchain. Speaking at the 2018 CFA Institute Equity Research and Valuation conference, regarding blockchain in financial services, Caitlin Long predicted that “All financial services professionals must develop operational expertise [in blockchain]” within the next few years.

Data Science and Big Data in Finance

The advent of Big Data has been driving significant changes in investment management for several years. The term Big Data refers to alternative data sources that can be analyzed because machine learning, AI, and related technologies now have the ability to evaluate unstructured data (such as text, images, and spoken languages) on a large scale. These applications are giving investment professionals access to a vast amount of public information, much of which was not available to investors before. Increasingly, investment managers are using Big Data in their investment processes to gain insights that can give them an information advantage.

What Does a Data Scientist Do?

Data scientists, who are increasingly present at investment organizations, analyze datasets (many of which are from new or alternative sources), apply coding/programming skills and modern analytical techniques to databases to seek meaningful patterns and insights, and communicate relevant findings. They provide support and advice to relevant teams within the organization (including front office investment teams) and develop tools and dashboards to enhance/enable improvements to the overall investment process.

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Why Is CFA Institute Focused on Fintech?

CFA Institute consistently monitors key debates and evolving issues in the investment industry. Fintech, a topic incorporated in the CFA Program curriculum, will inevitably affect the way the industry operates, careers in the investment profession, and investor outcomes. So we’ve taken a proactive approach to thought leadership on this topic. Focusing on opportunities for change, our goal is an investment industry in which investor interests come first, markets function at their best, and economies prosper.

Investment Firm of the Future: Changing Roles, Skills, and Organizational Cultures

This report develops the context and means to address challenges for organizations in the investment industry over the next 5–10 years.

Future State of the Investment Profession: Pursuing Better Outcomes for the End Investor, Industry, and Society

This report focuses on megatrends in finance including fintech, client preferences, macroeconomic conditions, regulatory shifts, and demographic changes.

Fintech and the Future of Finance

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What is fintech? Defining financial technology

April 08, 2022

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Fintech: a commanding presence in a traditional space

What is fintech? Fintech is a blending of the words financial and technology and refers to emerging technology that improves the delivery and use of financial services. Fintech facilitates a wide range of products and services used by consumers and businesses including mobile banking,

peer-to-peer payments, online investing, cryptocurrency and many other offerings.

What is a fintech company?

Broadly speaking, a fintech company is one that employs emerging technology to provide financial services. The technology used depends on the offering and whether it’s applied to back-end systems or customer-facing experiences. Fintech encompasses everything from the internet to cloud services, mobile apps, blockchain, artificial intelligence, cryptocurrency, digital payments applications and more.

A growing preference for digital payments among consumers and businesses, greater investments in solutions based on new technologies and high adoption of IOT devices all support the expansion of the global fintech market. The Americas is the region with the most fintech startup companies globally with 10,755 as of November 2021. EMEA (Europe, the Middle East and Africa) is not far behind with 9,323 fintech startups, and the Asia Pacific region has 6,268 (also as of November 2021).

Who uses fintech?

With 88% of Americans using some type of fintech app to manage their finances, fintech use has become nearly as ubiquitous as smartphone use. While younger generations including 95% of millennials are the most prolific users of fintech, other generations are quickly getting up to speed on fintech offerings. Fintech use among consumers aged 56 and older doubled between 2020 and 2021 to 79%.

Fintech users fall into four main categories: 1) financial institutions (B2B); 2) financial institutions’ clients; 3) small businesses (B2C); and 4) consumers. All four groups cite similar reasons for using fintech products and solutions: convenience, control and cost savings. Additionally, fintech enables all four groups to interact, facilitating opportunities for greater access to financial services and more accurate data and analytics.

What do fintech companies do?

Fintech companies integrate new and emerging technologies into financial services to enhance and automate these services for businesses and consumers. By modernizing traditional financial offerings through technology, fintech companies help their customers improve access, streamline operations and manage costs for a wide range of financial matters.

What makes a fintech company: The three Ds of financial technology

The global fintech market has experienced massive growth and is anticipated to increase at a CAGR of around 20% over the next four years to reach a market value of approximately $305 billion by 2025. Fintech holds a commanding presence within the financial services industry and the consumer marketplace and is characterized by three key factors.

1. Digitization

Fintech leverages advanced financial technology to empower businesses and consumers to take more control over the financial aspects of their lives. Underlying it all is digitization . The rapid and widespread adoption of digital technologies, driven in great part by the ubiquity of smart phones, provides the basis of all fintech offerings.

New digital technologies driving fintech include things like machine learning/artificial intelligence, predictive behavioral analytics, data driven-marketing and automated customer service technology (e.g. chatbots ) – all which help expediate financial services to consumers and reduce operational costs for business. And the market is growing. Global spending on digital transformation reached 1.3 trillion US dollars in 2020, growing 10.4% year-on-year.

2. Decentralization

The second “D” is decentralization. By unbundling conventional financial services such as mortgages, investments and business loans into individual offerings, fintech improves access to financial services. Enabled by digital technologies, consumers and businesses can bypass traditional routes and more directly and quickly obtain the services they need. This helps expand financial inclusion by making financial services more accessible to people who are unbanked or underbanked.

3. Disruption

Digital technologies and decentralized services have upended the traditional way of accessing financial products and services, which brings us to the third “D.” Fintech is one of the great disruptors in the financial services industry. Unencumbered by processes entrenched in larger organizations, fintech start-ups have been able to respond to changes in the marketplace more easily and push innovation through faster and at greater scale. And they’ve gotten the attention of venture capital firms. In recent years, investment funding in fintech companies has hit record levels, surging 169% from 2020 to $131.5 billion in 2021.

How is fintech changing financial services?

Financial institutions, investment firms, insurance agencies and other traditional financial services organizations are responding to the digitization, decentralization and disruption in the industry. With fintech potentially touching every aspect of a financial transaction, traditional players have no choice but to embrace new opportunities to expand their offerings and improve the customer experience.

Banks and credit unions are investing in fintech products and services to improve conventional offerings. They’re using fintech for fraud monitoring, to process payments, streamline accounting processes and to improve customer-facing activities like personal banking, mortgages and business loans. During the onset of the COVID-10 pandemic, fintech played a major role in financial institutions helping their customers secure government assistance through the Payroll Protection Program.

On the consumer side, the digital technologies driving fintech have become intrinsic to everyday financial transactions. Fintech underlies the peer-to-peer payment apps that make it easy for friends to split a dinner check, the banking apps that allow consumers to make deposits by taking a picture with their smartphone and the apps that make it easy for consumers to manage investments on their own.

What are the fintech categories?

In the past few decades, fintech innovation has spread broadly to cover most aspects of finance. Fintech companies are most often categorized into payments, investments, banking and insurance. Fintech companies also operate in matters having to do with cryptocurrency, personal and equity financing and international money transfers.

Payments fintech: Financial technology companies that work within payments typically specialize in letting people pay each other outside of the banking system. They no longer need to pay bank fees for peer-to-peer payments.

Investment fintech : Investment and wealth management fintech companies help financial institutions understand customers and data better in order to offer better products and services and ultimately find the right saving and investing strategies for their clients.

Banking fintech : Companies in this space often offer different options and fee structures than traditional banks. These companies focus on the underbanked consumers who often don’t get approved for traditional loans and credit cards.

Insurance fintech: Fintech companies in this category typically use technology to reach customers that don’t have insurance coverage or need a different type of insurance (for a short period of time).

Cryptocurrency fintech: These financial technologies offer a convenient way to buy and sell preferred cryptocurrencies. Cryptocurrency exchanges in this space also typically offer ways to purchase, store, trade and sell crypto (bitcoin, Ethereum, Cardano, Litecoin, etc.).

Equity financing fintech: Companies in this sector of financial technology help businesses raise money easily whether via crowd funding or access to specific type of investor without going through banks to ask for loans.

International money transfer fintech: These companies offer less expensive and faster ways to transfer money internationally.

What are examples of fintech companies?

With fintech such a hot topic spanning so many categories, there’s no shortage of “most popular fintech companies” lists. Here’s a look at some of the fintech companies occupying payments, investments, banking, cryptocurrency and insurance.

Payments: Klarna, a leader in invoice and credit-based payments, has carved a commanding niche for itself in the expanding buy now, pay later (BNPL) space. In 2017, Klarna partnered with Worldpay from FIS to provide payment services to help e-commerce businesses improve conversion rates and streamline the checkout process.

Investments:Founded in 2012 as eShares, Inc., Carta is a cloud-based equity management solution that helps companies and investors manage their capital tables, valuations, investments and equity plans. One of the company’s differentiating factors is the number of registered patents and trademarks it holds.

Banking:Digital banking startup and alternative bank Chime offers a mobile-first banking experience that has gained the attention of younger, middle-income consumers. Chime is not actually a bank and instead leverages banking services by The Bancorp Bank or Stride Bank, N.A., Members FDIC.

Insurance:“Insuretech” companies like Hippo are taking fintech into the insurance space to streamline the applications and claims process. Hippo uses AI, satellite imagery, public data and other factors when estimating coverage and premiums.

Cryptocurrency:“Kraken, which operates one of the largest cryptocurrency exchanges, became the first fintech of its kind in US history to receive a bank charter recognized under federal and state law. It will be the first regulated US bank to provide financial services for digital assets.

Equity:Crowdfunding services like Kickstarter offer ways for business and individuals to seek basic or additional funding for projects.

International money transfer:Ripple uses blockchain to provide a faster and less expensive way for financial institutions to process payments anywhere in the world.

When did fintech start?

While the word seems relatively new, fintech is not an entirely new concept. Finance and technology have a long history together, beginning more than 150 years ago when telegrams and morse code were developed and used to communicate financial matters and facilitate transactions. Some

academics have gone so far as to assign different eras in the evolution of fintech. Following is a short overview.

1886-1967: This was a time of building the foundation for what would years later be coined “fintech.” The US saw the completion of infrastructure such as the first transatlantic cable in 1866 and the establishment of Fedwire in 1918 (although the Fed began transferring funds between parties three years prior). The ability to conduct financial transactions over long distances was a huge advancement in financial services.

1967-2008: This phase of fintech’s history is characterized by the move from analog to digital in financial services beginning with the installation of the first ATM in 1967. The 1970s witnessed greater digitization of financial services with the introduction of NASDAQ, the first digital stock exchange, and SWIFT, which established a communication protocol between banks that made large cross-border payments possible.

The progress toward digital banking continued into the 1980s with the development of bank mainframe computers, and online banking. Digital banking really began to take center stage in the 1990s with consumers embracing the convenience it offered. The launch of PayPal 1998 pointed to the greater trend toward online payment systems.

2008-2015: The financial crisis ushered in a new era marked by changes in financial regulations and heightened adoption of mobile devices, both of which helped set the stage for start-ups using financial technologies like cryptocurrencies and blockchain. It was in these years that fintech began to have a larger influence on banking and the ability to use digital technology to connect disparate financial systems. Banking as a Service (BaaS) platforms enabled financial institutions to replace legacy systems with digital solutions that improved the customer experience.

What’s the future of fintech?

While fintech continues to expand opportunities for both consumers and businesses, it also faces security and regulatory challenges. In the highly regulated financial services industry, government entities are grappling with the most effective way to safeguard fintech transactions without hindering their effectiveness.

The financial services industry is historically risk-adverse, and problems arise when fintech moves too quickly. With fintech touching a broad range of offerings and industries, formulating a unified, comprehensive approach to deal with security, regulation and risk is challenging. We expect the response in all these areas will continue to evolve as fintech advances as a dominant force in financial services offerings.

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What is Financial Technology (FinTech)? A Beginner’s Guide

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What is Financial Technology (FinTech)? A Beginner’s Guide

FinTech (financial technology) is a catch-all term referring to software, mobile applications, and other technologies created to improve and automate traditional forms of finance for businesses and consumers alike. FinTech can include everything from straightforward mobile payment apps to complex blockchain networks housing encrypted transactions.

In this guide, we’ll discuss the various types of fintech, the skills needed to work in the field, and the job outlook for several fintech careers. We’ll also take a closer look at a few effective ways to learn key industry skills, such as an immersive online fintech bootcamp — a great way for aspiring fintech professionals to get hands-on experience.

FinTech 101: Understanding the Basics

A Simple Definition of FinTech

The term “fintech company” describes any business that uses technology to modify, enhance, or automate financial services for businesses or consumers. Some examples include mobile banking, peer-to-peer payment services (e.g., Venmo, CashApp), automated portfolio managers (e.g., Wealthfront, Betterment), or trading platforms such as Robinhood. It can also apply to the development and trading of cryptocurrencies (e.g., Bitcoin, Dogecoin, Ether).

A Brief History of FinTech

While fintech seems like a recent series of technological breakthroughs, the basic concept has existed for some time. Early credit cards in the 1950s generally represent the first fintech products available to the public, in that they eliminated the need for consumers to carry physical currency in their day-to-day lives. From there, fintech evolved to include bank mainframes and online stock trading services. In 1998, PayPal was founded, representing one of the first fintech companies to operate primarily on the internet — a breakthrough that has been further revolutionized by mobile technology, social media, and data encryption. This fintech revolution has led to the mobile payment apps, blockchain networks, and social media-housed payment options we regularly use today.

How Does FinTech Work?

While fintech is a multifaceted concept, it’s possible to gain a strong understanding. FinTech simplifies financial transactions for consumers or businesses, making them more accessible and generally more affordable. It can also apply to companies and services utilizing AI, big data, and encrypted blockchain technology to facilitate highly secure transactions amongst an internal network.

Broadly speaking, fintech strives to streamline the transaction process, eliminating potentially unnecessary steps for all involved parties. For example, a mobile service like Venmo or CashApp allows you to pay other people at any time of day, sending funds directly to their desired bank account. However, if you paid instead with cash or a check, the recipient would have to make a trip to the bank to deposit the money.

FinTech Trends

Over the years, fintech has grown and changed in response to developments within the wider technology sector. In 2022, this growth was defined by several prevailing trends:

Digital banking continues to grow: Digital banking is easier to access than ever before. Many consumers already manage their money, request and pay loans, and purchase insurance through digital-first banks. This simplicity and convenience will likely drive additional growth in this sector, with the global digital banking platform market expected to grow at a compound annual growth rate (CAGR) of 11.5 percent by 2026.

Blockchain: Blockchain technology allows for decentralized transactions without a government entity or other third-party organization being involved. Blockchain technology and applications have been growing quickly for years, and this trend is likely to continue as more industries turn to advanced data encryption. Check out our guide to blockchain technology if you’re interested in learning more.

Artificial Intelligence (AI) and Machine Learning (ML): AI and ML technologies have changed how fintech companies scale, redefining the services they offer to clients. AI and ML can reduce operational costs, increase the value provided to clients, and detect fraud. As these technologies become more affordable and accessible, expect them to play an increasingly large role in fintech’s continued evolution — especially as more brick-and-mortar banks go digital.

The Technologies That Power FinTech

Modern fintech is primarily driven by AI, big data, and blockchain technology — all of which have completely redefined how companies transfer, store, and protect digital currency. Specifically, AI can provide valuable insights on consumer behavior and spending habits for businesses, allowing them to better understand their customers. Big data analytics can help companies predict changes in the market and create new, data-driven business strategies. Blockchain, a newer technology within finance, allows for decentralized transactions without inputs from a third party; tapping a network of blockchain participants to oversee potential changes or additions to encrypted data.

How Safe is FinTech?

FinTech companies are generally trusted by consumers — according to Forbes, 68% of people are willing to use financial tools developed by non-traditional (e.g., non-financial, non-banking) institutions. However, many fintech applications are relatively new, and they’re currently not subject to the same safety regulations as banks. This doesn’t mean that consumers shouldn’t trust fintech companies with their money — it just means that being careful can be beneficial. For most consumers, the benefits of working with a fintech company outweigh the perceived risks.

Different Types of FinTech

FinTech has been used to revolutionize financial institutions for millions of people across the globe, changing how we pay each other, buy stocks and other financial instruments, and access financial advice. There are many different fintech companies offering unique services for their clients. Here are a few prominent examples:

Robinhood (Stock Trading)

Robinhood is one of many apps that facilitatesdigital stock trading, meaning it distills the traditional broker-client relationship into an easily accessed online interaction. Robinhood’s founders saw that most investment platforms charged high fees to their customers, even though executing trades doesn’t cost much. In response, the company launched its fee-free trading platform, allowing smartphone users to trade stocks more freely. The service offers commission-free stock trading and exchange-traded funds; it has also recently started offering cryptocurrency trading for its users.

Venmo (P2P Payments)

Venmo is a popular example of a P2P payment resource, or a service that allows users to perform transactions quickly through direct digital file-sharing. Companies like Venmo make it easy for people to initiate free transactions with their friends and family or low-fee payments to businesses. Most notably, the company frames its transactions through a social feed, making it possible to share and display payments with a friend list. Services like Venmo have capitalized on an increasingly cashless society via smart devices and social networking.

Klarna (E-Commerce)

Klarna is a fintech company that provides payment services for e-commerce, or, broadly, any activity comprising a digital transaction. Specifically, Klarna features direct payments, pay-after-delivery options, payments for online storefronts, and installment plans. The service is a regulated bank that allows customers to purchase something on a “buy now, pay later” model, with products being purchased on interest-free or low-fee installment plans. Splitting a transaction in this way allows consumers to pay for a product over time instead of all at once.

Wealthfront (Wealth Management)

Wealthfront is a fintech robo-advisor — a fintech platform that helps its users by automatically investing their money and providing financial advice based on their goals. Robo-advisors use computer algorithms and special software to build an investment portfolio without input from a financial advisor. The software automatically invests and rebalances investments based on a user’s needs, goals, and market conditions. Wealthfront, in particular, offers automatic rebalancing, daily tax-loss harvesting, and other services rooted in automated investing, which can benefit investors by making their investments easier to manage without traditional manual intervention.

Square (Business Payments)

Square is a point of sale and payment service for businesses, meaning it allows businesses to accept credit cards on a smartphone, tablet, or terminal. Before companies like Square, small businesses sometimes had trouble accepting credit cards due to high fees and difficult-to-use equipment. Square provides an easy-to-use process that allows businesses to accept payments, print receipts, and offer virtual gift cards to their customers.

How to Learn FinTech (and the Five Skills You Need)

FinTech is a growing field offering a variety of job opportunities for those with relevant experience. Are you interested in a career in fintech? Here are a few pathways for learning key industry fundamentals — plus several key skills to hone right away.

Educational Pathways in FinTech

FinTech Boot Camps

FinTech boot camps provide a space for students to get started quickly in fintech. Boot camps provide structured learning opportunities and hands-on experience for students interested in the field. Boot camps are both personalized and intensive — they offer thorough curricula simulating real-world experiences but they often can be pursued remotely, in a schedule-friendly manner. Columbia Engineering FinTech Boot Camp, for example, offers a base for anyone wanting to get started in fintech within just 24 weeks, including flexible modules covering everything from financial analysis to algorithmic trading and blockchain transactions.

Degrees With a Focus on FinTech

When it comes to traditional degrees, more colleges are offering degrees with a focus on fintech as the field grows. These programs allow students to learn the specifics of a traditional finance major while developing the technical skills that may be potentially valuable in fintech. These programs typically take 2-4 years to complete, depending on the degree program and how many classes a student can take at once.

Self-Taught FinTech Options

There are also many resources available for those wanting to learn fintech on their own, including free online courses, educational multimedia and apps, and digital guides. Self-teaching options are ideal for those favoring a fully autonomous learning structure, offering the chance to learn industry basics along with personal organization and time management skills.

Key FinTech Skills

ProgrammingCybersecurityAI/ML and Data ScienceBlockchainProgramming

A vast majority of fintech entities use mobile applications or websites to broaden their reach and increase consumer value. Programmers and software developers are primarily responsible for building and maintaining these fintech sites and applications, designing them to be secure, efficient, and navigable. Popular fintech programming languages include Java, C++, Python, and Ruby.

Cybersecurity

Most modern fintech companies are data-driven and often connected to vast digital networks which deliver new experiences and possibilities for users. This framework provides a great deal of value, but it can also increase the risk of cyberattacks and security breaches. Therefore, aspiring fintech professionals can benefit from a working knowledge of cybersecurity; studying how it is used to protect fintech companies from hackers and other cyber threats.

AI/ML and Data Science

Today’s fintech users generate quite a lot of data, and many fintech companies use this data to personalize their services and deliver additional value. Big data can be used to make financial predictions based on client behavior; managing finances for clients and leading to critical insights that enable stronger, more informed decision making. For this reason, ambitious fintech professionals will want to have a basic understanding of data analysis, as it will likely play a role in their long-term career.

Specifically, artificial intelligence (AI) and machine learning (ML) algorithms are regularly used to process and analyze large amounts of data; in doing so, they allow companies to generate actionable insights. AI/ML algorithms can lower risk, increase returns, automate processes, and make predictions for the future — and as a result, they stand as a valuable data-oriented skill for anyone wanting to work in fintech.

Blockchain

As cryptocurrency continues to become a prominent fintech sector, the need for blockchain savviness has grown to follow suit. It helps aspiring fintech professionals to have at least a working knowledge of blockchain’s underlying architecture and encryption attributes — as well as its various uses and implications in the broad trading, lending, and reconciling of currency all over the world. Blockchain-based cryptocurrency is expected to disrupt the financial industry for years to come, so having this type of skillset can make the transition easier to navigate.

FinTech Careers, Job Outlook and Salaries

FinTech has spawned a growing range of job opportunities for those interested in the field. Here is a quick overview of a few such careers:

Financial Analyst

Financial analysts help businesses make decisions that can lead to stronger future returns. They employ high-level critical thinking to assess the performance of stocks, bonds, and other financial instruments. Currently, job prospects for financial analysts are strong. According to the Bureau of Labor Statistics (BLS), the field is expected to grow by 5 percent by 2029, and the median pay for a financial analyst was $83,660 in 2020.

Information Security Analyst

Information security analysts plan out and execute security initiatives to protect computer systems and data from unauthorized access — a must for today’s fintech companies. Job prospects for information security analysts are incredibly strong. According to the BLS, the job outlook for information security analysts is expected to grow by 31 percent by 2029, which is significantly faster than the average for all industry occupations. The median pay for information security analysts in 2020 was $103,590 — also much higher than the national average.

For further reading, see our recent guide on how to become an information security analyst.

Blockchain Engineers

Blockchain companies and applications are a growing part of the fintech ecosystem. Blockchain engineers design, build, and maintain decentralized blockchain applications like cryptocurrency exchanges, lending applications, and voting platforms. According to CareerOnestop, the median salary for a blockchain engineer in 2020 was $92,870, and the number of jobs in the field is expected to grow by 6 percent by 2029.

Meanwhile, you can also consult our guide on the top fintech careers if you want to learn more about other opportunities in the field.

FinTech FAQs

What skills do you need for fintech?There is a wide range of jobs available in fintech, and many of them are built around skills in programming, cybersecurity, AI/ML, data analysis, and blockchain. Completing an online fintech bootcamp is a great starting point for learning such skills on your journey to a new career.

Is PayPal fintech?Yes, PayPal is a fintech company. In fact, PayPal is one of the largest fintech companies in the world, and it was also one of the first companies to operate in the space. The company is a global giant that has changed how many of us transact online.

What is the difference between FinTechs and banks?FinTechs and banks provide different services for their clients. Traditional banks are institutions usually comprised of both brick-and-mortar locations and digital entities, and they are licensed to collect deposits and use them to fund loans for customers. FinTech, on the other hand, broadly refers to any technology aimed at facilitating and streamlining digital transactions. Fintech has been adopted by countless businesses to improve their financial services and, in many cases, make their products more accessible. Most of the time, fintech companies store customer money in a bank account and provide additional services and value to the client.

Will FinTech replace banks?At this point, it is unclear if fintech resources will one day completely replace brick-and-mortar banks. However, if they do, they would likely be subjected to the same government regulations as existing banks and have to change how they operate.

Do you need to know coding to work in FinTech?Coding isn’t strictly necessary to get into fintech, but there are many software engineering and coding-related jobs available in the field. Having a strong familiarity with coding gives an individual a wider range of potential fintech employment opportunities.

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Yes, 2 to 5 years

Yes, more than 5 years

Yes, more than 10 years

Which best describes your goal?

Recent graduate, first job

Change my career path

Advance my career

Grow my business

I'm not sure

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Zip / Postal Code

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Highest level of education

Some High School

High School Diploma or GED

Associate's Degree

Bachelor's Degree

Some graduate coursework

Graduate Degree

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Preferred Contact Method

How do you prefer to be contacted?

Phone Call

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How soon do you want to start?

Immediately

Within 6 months

In 6-12 months

In a year or more

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Experience in this field

None

Yes, Less than 2 years

Yes, 2 to 5 years

Yes, more than 5 years

Yes, more than 10 years

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Country

USA

Canada

Germany

Mexico

State/Province

Alaska

Alabama

Arkansas

Arizona

California

Colorado

Connecticut

District of Columbia

Delaware

Florida

Georgia

Hawaii

Iowa

Idaho

Illinois

Indiana

Kansas

Kentucky

Louisiana

Massachusetts

Maryland

Maine

Michigan

Minnesota

Missouri

Mississippi

Montana

North Carolina

North Dakota

Nebraska

New Hampshire

New Jersey

New Mexico

Nevada

New York

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Virginia

Vermont

Washington

Wisconsin

West Virginia

Wyoming

Alberta

British Columbia

Manitoba

New Brunswick

Newfoundland and Labrador

Nova Scotia

Ontario

Prince Edward Island

Quebec

Saskatchewan

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I want to

I want to...

Which best describes your goal?

Start a new career

Switch career path

Advance current career

Start/Grow business

Prefer not to say

Other

Launch a new career

Change my career path

Further my career

Become an entrepreneur

Recent graduate, First job

Prefer not to say

Other

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