Remember when phones were only used to make calls? They can now be used to make payments and invest money, among a multitude of other things, from playing games to stargazing and boarding the plane! This combination of finance and technology is called FinTech and can mean everything from online banking to smart apps that help you split a restaurant bill. Here’s what you need to know.
It’s disrupting the financial world
Most FinTech companies are start-ups which aim to reshape and revolutionise finance by providing services and products 24/7 on any digital device. And in doing so, they directly challenge established financial institutions, like banks or asset management firms, which in turn are trying to keep up with the wave of innovation by providing more online and digital solutions for customers – although it’s not always easy for big established companies to be agile.
It’s always been there
Contrary to popular belief, FinTech isn’t new. Technology has been changing financial services for years. In the 1950s, credit cards were introduced to replace the cash and make life easier. This is FinTech! The late 1960s brought ATMs to the high street, facilitating money withdrawals for all. This is FinTech too! In the 1980s The Bank of Scotland launched the UK’s first online banking services, known as Homelink. Also, FinTech! Since the 1990s and emergence of the Internet, financial services have increasingly been available online and via mobile apps. This is FinTech as we experience today!
There are many applications
FinTech isn’t limited to checking your bank account online and includes a large variety of services. In fact, the breadth of innovation seems to be growing as new companies are popping up almost every day with new products and services to make financial management easier and quicker. Whilst some FinTech companies allow you to purchase insurance without leaving your home, others can provide you with online banking services and budgeting tools. Technology has even been used to make investing simple, allowing people to get a portfolio of investments managed for them every day, with just a few clicks.
It aims to democratise financial services
FinTech companies are on a mission to make financial services and products accessible to everybody. Take robo-investing platforms as an example. With such services, there’s no need to be super wealthy or have previous experience of investing, since you can invest from as little as £1 and experts do the hard work for you, from picking investments to monitoring your portfolio. All you have to do is choose how much you want to invest, how long for, and the risk level you’re comfortable taking. Another advantage is that technology allows these services to keep the cost of investing low, which can be passed onto customers through affordable fees.
It’s on the rise
Since 2014, the funding received by the global FinTech industry has nearly doubled and reached an impressive $38.9bn1 in 2017, suggesting that FinTech is playing an increasingly important role in financial markets. In the UK, FinTech companies amassed an estimated £1.29bn2 in funding in 2017, making FinTech one of the fastest growing business sectors in the country. And recently, the Government has appointed regional envoys, including our co-founder and CEO Richard Theo, to support growth of the FinTech sector in the UK and create the optimum environment to help small businesses and FinTech firms flourish. Also traditional financial corporations are getting in the game and embracing the digital revolution as they’re partnering with FinTech companies or launching their own.
1: Fintech Global, Jan 2018 - http://fintech.global/global-fintech-investment-has-almost-doubled-since-2014/
2: Business Insider, Feb 2018 - http://uk.businessinsider.com/investment-in-uk-fintech-grew-150-in-2017-2018-2
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The comments and opinions expressed in this article are the author's own and should not be taken as financial advice from Wealthify.