Fintech in a Flash

Financial Technology Made Easy

Agustin Rubini

• Editorial: De Gruyter
• Año: 2018
• ISBN:
  9781547401079
• Edición: 1
• Categoría: Economía
• Categoría: Política monetaria

The financial services technology industry is booming and promises to change the way we manage our money online, disrupting the current landscape of the industry. Understanding fintech's many facets is the key to navigating the complex nuances of this global industry. Fintech in a Flash is a comprehensive guide to the future of banking and insurance. It discusses an array of hot topics such as online payments, crowdfunding, challenger banks, online insurance, digital lending, big data, and digital commerce.

The author provides easy to understand explanations of the 14 main areas of fintech and their future, and insight into the main fintech hubs in the world and the so-called unicorns, fintech firms that have made it past a $1 billion valuation. He breaks down the key concepts of fintech in a way that will help you understand every aspect so that you can take advantage of new technologies. This detailed guide is your go-to source for everything you need to confidently navigate the ever-changing scene of this booming industry.

Chapter 1
The Booming World of Fintech

What Is the Fintech Industry?

The financial technology—or fintech—industry refers to the group of companies that are introducing innovation into financial services through the use of modern technologies. Some fintech firms compete directly with banks, while others have partnered with them or supply them with good or services. What is clear is that fintech companies are improving the financial services world through introducing innovative ideas, allowing for speedy delivery and increasing competition.

Financial technology integrates various types of financial services into the day to day lives of customers. Millennials, as well as the generations coming up behind them, are used to technology and want to manage their money in an easy and quick manner, instead of walking to physical branches to perform transactions and other operations.

Fintech is redefining financial services in the 21st century. Originally, the term applied to technology used in the back-end of established trade and consumer financial institutions. It has expanded to include various innovations in technology, including cryptocurrencies, machine learning, robo advice and the internet of things.

Areas of Fintech

In this section, we provide a preview of what will be covered in the book. Feel free to skip to any chapter that interests you, or read the chapters in order.

In our “New Entrants to Banking” chapter, we look at the new business models that are being introduced to challenge traditional banking, such as aggregators and infrastructure providers. We also reflect on how open banking and APIs will change the industry.

In our “Rethinking Payments and Remittances” chapter, we will explore how fintech is paving the way for innovating the way people send and receive money. We look at peer-to-peer payments, mobile apps, cryptocurrency transfers, social payments, and nanopayments. Innovations in remittances are particularly beneficial to migrant workers, who need to send money to their families at home.

In our “Digital Lending Innovation” chapter, we look at peer-to-peer lending marketplaces, as well as other forms of lending and forms of credit scoring, which allow more people to access the market. We analyze different niches, including consumer lending, student lending, business lending, and mortgages.

In our “Commercial Banking Transformation” chapter, we examine how this sector is being revolutionized, which are the new banks to look out for, and how the value-added services space for small and medium enterprises is starting to merge with traditional banking services.

In our “Next Generation Commerce” chapter, we look at how fintech influences retail shopping. We analyze the different technologies, such as mobile point-of-sale terminals and tablet-based point of sales. Additionally, we examine online commerce and the companies that are disrupting the space, making commerce easier and cheaper for all parties. We also look at how mobile wallets are slowly replacing cash and plastic cards.

In our “Crowdfunding and Crowdinvesting” chapter, we appraise this new way of obtaining funds for all sorts of different purposes, including social purposes and investing in firms. We also consider crowdinvesting, which allows individuals and companies to invest their money in small businesses in exchange for stock.

In our “Innovative Wealth Management” chapter, we find out how fintech can be used to democratize investments by using technologies such as robo-advisors, which can offer low-cost investment advice, artificial intelligence, and advanced analytics.

In “The Power of Big Data and Artificial Intelligence” chapter, we examine how the increase in the power of analytics can help provide better insights into customers and their behaviors. We look at the use cases that are being developed specifically for the financial services industry.

In “The Internet of Things” chapter, we explore how connected devices in the cloud can communicate with each other and even perform payments smartly. We consider use cases using blockchain, in insurance, real estate, and in lending.

In our “Blockchain and Distributed Ledgers” chapter, we explain distributed ledgers in a way that is simple to understand. We cover the main cryptocurrencies that have emerged and the areas that are most likely to be disrupted by this new way of storing data.

In “The Rise of InsurTech” chapter, we look at how new business models could potentially change the fintech industry by introducing a peer-to-peer framework. We also find out how blockchain, smart contracts, and the internet of things impact this area.

In our “Identification, Cybersecurity, and RegTech” chapter, we look at how these key enablers have evolved and provide the foundations for future growth all across the different fintech themes.

Short History of Fintech

It is difficult to pinpoint when financial technology began, but the 1950s are a good reference point. Technology is a key component of the financial services sector in various ways.

The 1950s saw the introduction of credit cards. Instead of carrying cash, people used these cards to pay for their purchases. ATMs were introduced in the 1960s, meaning that people no longer had to visit bank branches for certain transactions.

In the 1960s, banks started using mainframe computers for record keeping and data storage. In the 1970s, firms began to trade stocks electronically. In 1981 the first IBM PC was invented, ending the dominance of time-sharing terminal computing. In the 1990s, e-commerce business models and the internet thrived. Because of this, retail investors could experiment with online stock trading. In the 1990s, e-commerce business models and the internet thrived. Because of this, retail investors could experiment with online stock trading.

During the 50 years of fintech developments, innovators have created sophisticated treasury management, risk management, data analysis tools, and trade processing for financial services firms and institutional banks.

Currently, fintech is digitizing retail financial services through crowdfunding platforms, robo-advisors for retirement and wealth planning, payment apps, mobile wallets, and the like. Fintech provides access to alternative and private investment opportunities, as well as online lending platforms.

However, despite the fact that fintech is flourishing, banks have not been greatly affected. The main reason for this is that fintech and banks complement each other. Banks have realized that technology is a strategic asset and that it needs to be taken seriously.

Why Is Fintech Important?

Money makes the world go round—and financial services regulate how fast it spins. Disruption caused by fintech drives the financial industry to be smarter and more agile and allows it to deal with important problems in the world. For example, automated investing paves the way for all social classes to invest and see returns on their money. It also allows people in developing countries to transact, even if they don’t have a bank account. Yet the fintech industry has a lot of room for growth and improvement, and financial infrastructures should be revised for the benefit of consumers.

Fintech disruptors can also help develop better methodologies for risk assessment. For instance, OnDeck and Kabbage use information to assess the performance of small businesses using more than 1500 data points. Avant underwrites consumers using machine learning. Kickstarter taps into people’s wisdom to fund start-ups by allowing crowds to fund their preferred ideas. This means that more customers can get access to lending services.

Since the financial crisis in 2008, regulators have enforced strict compliance with bank regulations to make finance safer. Fintech can help regulators secure financial transactions and serve customers better by introducing technologies that automate regulation checks and sophisticated crime detection algorithms.

Why Has Fintech Become Popular Now?

The fintech sector received a huge influx of funds in 2014. The start-ups that received funding are hungry and ambitious and want to disrupt the banking sector. There are several factors that have contributed to the fact that fintech is flourishing now.

One of these is that fintech promises healthy returns on investments and growth opportunities, even though the business models are not yet fully understood. For example, nobody knows whether peer-to-peer financing is a model that can be sustained in the long term.

Additionally, new technologies have been emerging in several industries that can also be applied to financial services. These include blockchain technology, advanced machi...