Hello everyone, I am Anjum Khanna and this blog is about a special term quite popular these days “Fintech”. I, Anjum Khanna is quite impressed with this word. In my opinion, fintech describes the evolving intersection of financial services and technology. The term can refer to any start-ups, technology companies, or even legacy providers. So in simple terms, a blurred line is in between technology and finance.
We are hearing this word very often at different levels but somehow the actual meaning of this word is lost in many places. This word has three different meaning for three different bodies which have evolved this word:
First, body us start-ups, start-ups use technology to offer existing financial services at lower costs and to offer new tech-driven solutions for financial services. The second body is incumbent financial firms, they look to acquire or work with start-ups to drive innovation. This innovation is to ease out financial services as in banking or transactions.
The third body is technology companies which provide payment tools. Payment tools are also part of fintech. These all put together defines “Fintech”. So it’s is a revolution in the field of financial services with the help of technology.
When we think about Fintech, we often focus on start-ups, which works on the areas like banks and other legacy financial institutions. But we should think about all the players in a larger Fintech ecosystem, so we can define it in four categories:-
- First one is well-established big financial institutions such as Bank of America, Chase, Wells Fargo, and Allstate. We sometimes use “incumbents” word for these institutions.
- The second one is big tech companies that are active in the financial services space but not exclusively, such as Apple, Google, Facebook, and Twitter. These companies are not known for financial services but these are also fintech companies.
- The third category of companies is those which provide infrastructure or technology that facilitates financial services transactions. This broad group includes companies like MasterCard, Fiserv, First Data, various financial market utilities, and exchanges such as NASDAQ. This category broadly covered major companies which are involved in the financial transaction.
- The fourth category is of disruptors: fast-moving companies, often start-ups, focused on a particular innovative technology or process. Companies include Stripe (mobile payments), Betterment (automated investing), Prosper (peer-to-peer lending), Moven (retail banking), and Lemonade (insurance).
This is a broad categorization which shows that until now these all segments are different. But these are moving towards each other for an example financial institutions are becoming more technology focused. At the same time, big tech companies are offering peer-to-peer payment solutions over social networks and email. Meanwhile, disruptors are providing financial services that, until recently, you could get only from banks or financial advisors.
While we talk about future I, Anjum Khanna is seeing fintech on a completely different level as I am expecting fintech disruptors to continue to expand into other areas within financial services. There will be a lot of development in areas like marketplace lending, credit underwriting, digital cash, treasury functions, deposits, and bill payments. I also anticipate a lot of activity in the rob advice and wealth management space.
As every good thing comes with a threat in the same way technology also has its limitation. In the same way “fintech” offers amazing potential, but that can actually be a distraction. Institutions have to start with their own needs in mind, rather than working backward to figure out how to use the latest technology. This will help in inside out thinking and at the same time will help in expanding the business.