FinTech includes a huge range of products in which technologies and business models that is changing the financial services industry.
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If you've ever paid for something with your phone or
transferred money using an app or check your bank statement online, then you're
already part of a multi-billion dollar industry. It's called FinTech. And it's
changing economies around the world. FinTech is short for financial technology.
It seems simple, right?
Well, the term FinTech
includes a huge range of products in which technologies and business models
that is changing the financial services industry. It refers to everything from
cashless payments to crowd-funding platforms to Robo-advisors to virtual
currencies.
So every time you donate to someone's Kickstarter campaign,
that's FinTech or if you transfer money to someone using JazzCash or Easypaisa that's also FinTech. And that's
just the beginning here at a major FinTech conference in Amsterdam (i.e. located in
the Western Netherlands, in the province of North Holland).
Fin-Tech:
Threats for Traditional Banking
The hundreds of companies are trying to disrupt, especially
the banking and finance industries by changing the way we pay and borrow money.
And investors are buying it a global investment in the FinTech sector has added
up to nearly $100 billion since 2010. In 2017 alone, FinTech investment surged
18% of startups focusing on payment and lending technologies received the majority
of those funds. It's not just startups that are getting into FinTech, some of
the world's biggest companies from Apple to Alibaba are going big on it to just
think of Apple-Pay or Alipay.
One reason for all of this investment consumers are adopting
FinTech fast one out of every three people across 20 major economies report
using at least two FinTech services in the last six months, China and India are
leading the way with more than half of consumers using services like money
transfers, financial planning, borrowing and insurance, financial technology
has filled a void for people around the world who don't have access to
traditional banking services.
Acceptability
of Fintech Accounts by everyone
In fact, it's
estimated nearly 2 billion people worldwide are without bank accounts. Now,
thanks to FinTech. All you need is your phone to take out a loan or insurance.
Take Kenya, which pioneered a mobile banking system called M-PESA. Kenyans
access their M-PESA, accounts directly on their mobile phones to transfer
money, pay bills or take out loans.
Today, an estimated 96% of households in Kenya use M-PESA. One
study found it has helped lift roughly 2% of Kenyan households out of extreme
poverty. The rise of FinTech has forced traditional lenders, insurers, and asset
managers to embrace new digital technologies. For example, wealth managers now
have to compete with Robo advisors, which are automated financial planning
services.
When talking about the rise of AI-Robotics, thanks to high-tech algorithms. These services are available 24 seven and can be more
affordable than traditional asset managers. That helps explain why some Robo
advisors already have billions of dollars under management.
Fintech
Industry face Risk Appetite
Like any growing industry, FinTech isn't without risks, and
some regulators have struggled to keep up with the fast pace of innovation.
Let’s think of peer-to-peer (P2P) lending platforms where
individuals borrow and lend without going through a bank that would be compared to
traditional banks. These services might not be required to set aside as much
money in case customers default on their loans.
This can be risky for
companies and consumers data privacy is another major concern as more financial
services go digital cyber-attacks become a bigger risk. The challenges facing
financial technology are likely to grow as more businesses go digital. But for
many of the companies and consumers here, FinTech is more than a buzzword. It's
a big business opportunity.
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