When new technology comes into any sector, it changes things completely. And with these changes, it disrupts the status quo and brings in new challenges and opportunities. One sector that has experienced a seismic shift in terms of how things are done is the financial sector. And thanks to the thousands of FinTech startups, new innovations continue to come up every day.
In this article, we’ll delve into the exciting world of FinTech. We’ll look at the changes that the technology has brought, including its impact on traditional financial systems.
Payment Innovations
Everybody has witnessed the payment innovations that FinTech has had in the financial sector. This started all the way back in the 60’s with ATM cards, but the significant innovations started with E-wallets in the turn of the century. These shifted payments from banking halls to mobile phones, providing lots of benefits.
Innovations didn’t stop there, and they proceeded to P2P payments, which eliminated the need for banks in money transfers. We then experienced the many possibilities brought by cryptocurrencies, such as tracking the Bitcoin and Ethereum price. Today, we can even enjoy contactless payments thanks to NFT.
Blockchain Solutions
The biggest part of the financial revolution is that today, you don’t really need a central institution to pay for goods. This is thanks to blockchain technology, which offers new ways to record, verify, and share transaction information. The technology has been used in the sector, and it lets users reduce transaction costs and increase settlement times.
Due to its nature of operation, Blockchain has been used to come up with lots of different and diverse solutions for use in finance. Some popular examples of these are Decentralized Finance (DeFi), smart contracts, Tokenization of Assets, Identity Verification and KYC, and Securities Token Offerings (STOs).
Robo Advisors
AI has been the talk of the town since the launch of ChatGPT, and we have had thousands of AI solutions released since then. However, the technology has been applied in the financial sector for a while now, through Robo Advisers. These are automated financial planning services that replace the work of a financial advisor, freeing personnel.
With Robo Advisors, you can be guided and advised in your investment and even have your day-to-day management taken care of. And although there’s no human touch, your decisions will be based on empirical evidence, and you will avoid the common pitfall of emotional biases.
Peer-to-peer lending & Crowdfunding
One of the biggest pluses of FinTech is that it has promoted financial inclusivity by removing the need for the conventional banking system. Two ways how this has been achieved is through P2P lending and crowdfunding. The former makes it possible for individuals and small businesses with low credit history or unconventional income streams to access loans. This is usually at lower rates than banks, but the lenders also enjoy competitive rates.
Crowdfunding has also become quite popular today, and its being used to raise funds. People who have startups, creative projects, or charitable courses can use crowdfunding platforms to raise money. These do not have to be donations, as a crowdfunding project can also be rewards-based, equity-based, or even debt-based.
RegTech
Another impact of FinTech is the financial sector has been in terms of regulation compliance. Here, various companies have managed to use AI, machine learning, and data analytics to come up with solutions that can analyze huge volumes of company data in real time. These solutions can then ensure that financial institutions are able to efficiently meet the many regulatory requirements they have.
Two processes that RegTech has effectively covered, which are also very important, are the Anti-Money Laundering (AML) and Know Your Customer (KYC). When the technology is applied, these two ensure that an organization can efficiently do tasks such as verifying customer identity and also adhere to various regulations. However, RegTech goes beyond compliance to ensure a more efficient and customer-centric financial ecosystem.
