The rise of Fintech and how Blockchain technology can transform it
Fintech (financial technology) is a catch-all term for software, mobile applications, and other technologies designed to improve and automate traditional forms of finance for both businesses and consumers. Fintech can refer to anything from simple mobile payment apps to Blockchain networks that store encrypted transactions. In this blog, we’ll talk about the rise of fintech companies. We’ll also look at how blockchain technology transforms Financial Technology (Fintech).
What Is Fintech — Financial Technology?
The term “fintech” refers to innovative technology that aims to improve and automate the delivery and consumption of financial services. Fintech uses specialized software and algorithms to help organizations, business owners, and people better manage their financial operations, procedures, and lives via computers and, increasingly, smartphones.
Fintech combines two words, “financial” and “technology.” Fintech encompasses the development and use of digital currency such as Bitcoin. While that area of fintech draws the greatest attention, most money is still invested in the multi-trillion-dollar global banking business.
Fintech is transforming the financial sector in the same way that the Internet changed the publishing and music industries. Fintech is rapidly changing the nature of the banking industry, with some banks increasingly implementing digitization, paperless, and cashless processes.
Rise of Fintech companies
The rise of fintech has been fuelled by the introduction of smartphones and the invention of technologies such as Artificial Intelligence (AI) and cloud computing. Fintech investments are likely to increase in 2022.
The increasing connectivity and penetration of technology are changing how individuals handle money. This societal trend is supporting the expansion of fintech companies. A survey conducted by Plaid, 59% of Americans rely on fintech apps to manage their money more effectively during the COVID-19 pandemic. As a result, fintech will rise at a compound annual growth rate of 25% through 2022, reaching a market value of $309 billion, according to market research firm IDC.
Fintech companies have expanded to include a variety of consumer-based applications and services for trading stocks, managing finances, insurance, and investments. Digital payment is an essential fintech product. Its overall transaction value increased to $5.2 trillion in 2020 and is expected to increase to $6.6 trillion in 2021.
Artificial intelligence and machine learning will further boost the fintech market’s penetration and efficiency. According to a study conducted by the Economist Intelligence Unit (EUI), over 85 percent of finance executives intend to expand their investment in artificial intelligence.
Fintech is gaining traction in the consumer banking sector. There are numerous success stories in the consumer and small-business banking sectors. Fintech startups have been attracting customers away from traditional financial institutions by deploying innovative digital solutions. The emergence of mobile/online banks is the best example of this. These companies, which are moving away from the traditional branch-deposit banking model, provide customers with alternative banking solutions, such as intuitive technology and flexible services. As a result, many customers prefer the more rigid and limited services typically offered by traditional banks.
The Internet profoundly alters our relationship with money, just as it did in the newspaper and music industries. Fintech has capitalized on this by developing finance services based on the blockchain. With the Internet’s evolution people nowadays utilize tablet computers or smartphones. Smartphones are being used to undertake financial transactions. Fintech companies have taken advantage of the Internet, to provide services that are both faster and less expensive.
How does Blockchain transform Fintech?
People are now more knowledgeable and aware of the most recent technologies on the market. For example, a blockchain is a technology that has transformed the fintech sector by putting banking and finance at users’ fingertips.
The platform has developed several industry blockchain solutions designed to address the challenges a specific industry faces while also attracting positive upheavals. For example, blockchain technology in the banking and financial industries has already demonstrated great promise. Fintech is a sector in which millions of transactions are carried out daily worldwide. However, there is always the risk of financial fraud and flaws, leading to ineffective financial management. Blockchain technology can provide protection and security against such scams and has aided in developing a reliable financial system.
Furthermore, blockchain technology has developed the online banking industry, allowing people to execute online duties from the comfort of their own homes, avoiding the trouble of going out or waiting in long lines at ATMs.
Blockchain technology has helped remove fraud concerns while lowering expenses for all parties involved, including banks, customers, and merchants. In addition, blockchain-enabled new payment systems, such as cryptocurrency or virtual currencies like Bitcoin, are making transactions transparent, safer and more straightforward.
In the PWC report on the financial services sector and fintech from 2017, more than 77 percent of the financial services industry intended to use blockchain technology by 2020. The recent surge in interest has been significant because banking and financial institutions account for one-third of all institutions worldwide. It has been noticed that blockchain will be included by banking and financial operations for improved features and much more.
As per Statista, the market for Blockchain solutions for the banking system and financial institutions was assessed at $0.84 billion in 2020 and is predicted to grow further in the coming years, reaching approximately $22.5 billion in 2026.
Conclusion
Fintech companies are monitoring consumer financial behaviour. This enables them to provide tech-driven, intuitive money-management solutions to digitally savvy end-users, thereby perpetuating the financial world’s digital revolution.
Fintech refers to financial technology and innovation for banks, multinational corporations, small businesses, and entrepreneurs. For example, blockchain technology has transformed it, making transactions less expensive and more secure and at the same time increasing transparency.
Implementing blockchain in the fintech industry will help you eliminate fraud risks by providing a decentralized system that all parties involved can trust (customers, suppliers). Furthermore, the potential applications of this revolutionary technology are limitless and go far beyond fintech alone.
