FinTech abbreviated as FinTech is financial service innovation, which generally refers to an economic industry formed by a group of companies using technological means to make financial services more efficient.
What is FinTech?
The so-called FinTech is the abbreviation of Financial Technology, covering a wide range of fields, so the technology used is not limited to the blockchain. FinTech applies the evolution of IT to all kinds of financial service fields, eliminates "non-effectiveness" as much as possible, and solves the problem of speed so that users can use the service cheaply and conveniently.
A new venture that realizes the democratization and segmentation of financial services
Fintech is a combination of Financial + Technology. A Fintech company uses technology as the overall core driving force and applies technology to finance to improve the efficiency and profitability of the company.
The essence of FinTech is to replace the work performed by human beings with technology. The advantages of automation not only lower the cost but also extend convenient tools to the general public. As a result of the substantial cost reduction, all kinds of financial services that were previously only available to the affluent class have also become available to the general public, and the "democratization of financial services" has been realized due to technology.
"Technology supremacy" that trusts machines more than humans
The fundamental view of financial technology is that if the work performed by humans so far can be automated and completely de-intermediated using technology, the same performance can be achieved at a very low cost. Therefore, current financial institutions subdivide the integrated and operating performance and use IT to practice one by one.
Finance is a business that makes a difference with the monopoly of surplus and shortfall of money. It is because of its irreplaceable position that a lot of manpower is needed to confirm one transaction after another. In a sense, it can be said to be an extravagant way of doing things that have always been allowed. However, if financial technology can be used to achieve this efficiency at a low cost, then-current financial institutions may become unable to continue to pay the current high personnel costs.
In addition, behind financial technology, some ideas should be called "technological supremacy". "Technological supremacy" means that it is better to use it according to the fixed rules of the algorithm than to use it based on human judgment, and it is more trustworthy.
Through the use of big data, investment decision support systems, blockchain technology, identity verification, and other technologies to help financial companies conduct information exchange and data sharing. From sales channels, business partners, industry partners, and users that financial companies can evaluate the risks of financial business from multiple dimensions and better control financial risks.
The Fintech company is to apply technology to the financial field, not to change the nature of financial "risk management". Fintech uses technology as a means to cut into the financial field. While using technology to efficiently seize the market, it can also greatly improve the efficiency of financial services and risk control.
Application of FinTech:
The current public use of financial technology is mainly through card payment or electronic payment, such as credit card, Apple Pay, Line Pay, third-party payment, mobile payment, etc., which are all part of the application of financial technology. The scope of application of fintech is not only that but also includes cryptocurrency (bitcoin, etc.), which is the pioneer of fintech. In addition, there are many other fields such as financial big data, online shopping, online banking, and pure online banking.
In terms of technology, in addition to the Internet, information security, etc., financial technology is also based on the application of artificial intelligence and block training technology. It is an important field where major companies compete (such as Facebook, Apple, Google, software banking, etc.), many advanced countries have also established relevant policies to ensure the safety of financial technology.
Advantages of Fintech Investment:
Less procedure cost, higher remuneration
- Lower funding threshold
- More diversified investment targets and lower risk
- More transparent and real-time investment information
The financial technology trend is unstoppable. 2008 can be described as the first year of booming financial technology. In the past ten years, it has been vigorously developing and attracting investment. FinTech startups and cross-field industries have gradually replaced the traditional financial market. Fintech is guided by "service", changing the service process of the traditional financial industry and providing more professional and high-quality consulting services to enhance the customer service experience. There are currently eight major FinTech development areas in the world, including insurance business, wealth management business, lending (P2P) business, huge data analysis applications, payment business, Bitcoin and Blockchain technology, innovative business models, and biometrics and identity authentication. Among these application areas, the explosive growth of P2P lending, crowdfunding as a favorite fundraising method for small and medium-sized enterprises, and the investment in huge amounts of data analysis techniques are the bulk, and the market benefits brought by them are considerable.
The next step in fintech?
Global FinTech investment has more funds poured into Bitcoin and blockchain (Blockchain) technology applications, which also shows that investors are paying more attention to new areas of financial technology.
Many companies that want to enter the financial market mostly start with payment, helping target customers to save transaction costs, and by providing better services to increase the stickiness of target customers. Therefore, in terms of payment applications, the main application battlefields are in the United States and Europe. In recent years, more investment and applications have fallen on the Asian market. Two other important applications related to the payment that cannot be ignored are machine learning and biometrics. These two applications can help us improve financial security.
The security mechanism of payment should be improved with the changes of the times, and multiple transaction methods have increased the risk of being attacked during the transaction process. To monitor and process a large amount of data on the Internet, more and more machine learning techniques are applied to search and analyze risks in an attempt to find unusual behaviors and trading activities.
In terms of biometrics, the demand for biometric devices for financial applications in 2015 was 4.7 million, and the overall demand is expected to be 43.7 million in 2024; its software and hardware output value will also increase from US$126 million in 2015 to 2024 At US$2.2 billion in 2012, the Asia-Pacific region has the greatest growth potential, followed by the European region. Currently, the most commonly used biometric identification technologies on the market are the fingerprint identification system, iris identification, and face identification of smartphones. There are also credit card companies that use voiceprint recognition systems for online card swiping services, and there is palm vein recognition technology introduced by banks in ATMs. The market growth momentum of biometrics technology is high, and it will be practically applied to financial services. From this, it is observed that biometrics technology will gradually become one of the mainstreams of the market.
In addition, with the rapid development of information technology, the completion of infrastructures such as 4G mobile networks and broadband, and the popularization of smart handheld devices, more complete customer information and accurate big data analysis can be mastered to plan for diversified customers. With systematic and innovative financial services, the real FinTech is finance that masters’ big data.
The problems faced by the FinTech market and future challenges:
Although financial technology has brought a huge impact on the traditional financial industry, it has also created a new industrial ecology and new business models. However, in the future emerging markets, there will not be any third-party credit centers. To ensure that the user’s credit is good, all the user’s past social media activities, number of fans, influence, etc. will become the key factors for applying for services. Measure their risks for companies. But in the same way, the new trust mechanism may trigger the issue of infringement of privacy rights. How to break through users' guards and be willing to provide private information for enterprises to reuse is still a problem to be solved in addition to the current regulations.
On average every 10 years, the IT technology platform has a breakthrough in model transfer, with high service quality and the ability to expand customer benefits. However, users’ awareness of new technologies/services, even if they know that new technologies provide faster, cheaper, and safer services than the original technologies, users who have become accustomed to the original services do not feel any inconvenience or originality. In the case of losses caused by services, users will not easily change their existing behaviors and embrace new services without the difference between the new and the old services. Therefore, how FinTech can strengthen the user experience and deepen the difference in service is worth pondering.
Regarding the maturity of data analysis technology, different industrial fields will have different domain knowhow, whether data analysis technology can effectively deal with different industrial environments, unique organizational culture, organizational structure, and internal activities, and give a comprehensive evaluation, by important key points or suggestions are extracted from big data for decision-makers to make judgments. Data analysis is not only in the analysis of data, but also focuses on how to combine market demand and industry business models.
On the whole, the focus of FinTech development has shifted from the past financial industry application field to the diversified non-financial industry. Combining key technologies such as blockchain, big data analysis, machine learning, biometrics, and artificial intelligence, the development has the future potential of application services. If you can master key technologies, it will help you to layout future emerging markets and meet future market patterns.