FinTech generally refers to an innovative financial service industry formed by companies using technological means to make financial services more efficient.
What is FinTech?
FinTech is an abbreviation for Financial Technology, and covers a wide range of financial service fields. FinTech applies IT to financial transactions to eliminate inefficiencies and redundancies as much as possible. FinTech increases the speed of operations so that users can use services cheaply and conveniently.
A new technology that realizes the segmentation and specialization of financial services
Fintech is a combination of the words Finance and Technology. A Fintech company uses technology as its 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 substantial cost reductions, many forms of financial services that were previously only available to the affluent, have now become available to the general public. Technology has been used to realize the "democratization of financial services".
"Technology supremacy" that trusts machines more than humans
The fundamental view of financial technology is that if work performed by humans can be automated and performed using technology, that work can be achieved at a very low cost. Therefore, financial institutions are subdividing and integrating operating systems to perform services using IT.
Finance is the business of managing the differences between the surplus and shortfall of money. It is an irreplaceable service, but it requires a lot of manpower to perform its many repeated transaction. It can be said that typical finance methods have followed extravagant ways of doing things, but this has always been accepted. Financial technology looks into the ways in which financial transactions can be performed more efficiently and at lower costs. If traditional transactions performed by humans can be replaced with automated transactions, current financial institutions may become unnecessary. The increased efficiency of this technology would mean that financial institutions would soon no longer be able to pay the current high personnel costs.
Sometimes financial technology can even attain what could be called "technological supremacy". "Technological supremacy" can result when financial technology that uses fixed rules or algorithms can perform operations more efficiently and more trustworthy than humans can.
Through the use of big data, investment decision support systems, blockchain technology, identity verification, and other technologies, financial companies can conduct information exchange and data sharing. With information from sales channels, business partners, industry partners, and users, financial companies can evaluate the risks of financial business from multiple dimensions and better control financial risks.
By applying technology to the field of finance, Fintech companies can change the nature of financial "risk management". Fintech companies can use this technology to efficiently cut into the financial field and seize the market by greatly improving the efficiency of financial services and risk control.
Application of FinTech:
Current public use of financial technology is mainly through card payment or electronic payment, such as through credit card, Apple Pay, Line Pay, third-party payment, or mobile payment, etc. The scope of application of fintech also includes cryptocurrency (bitcoin, etc.), which was the pioneer of fintech. There are now many other fields which use FinTech such as financial big data, online shopping, online banking, and pure online banking.
In addition to Internet information security, financial technology is also used applications such as artificial intelligence and block chain 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: 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, there has been an explosive growth of P2P lending, such as crowdfunding, which been a favorite fundraising method for small and medium-sized enterprises. There has been substantial investment in bulk data analysis and the market benefits brought by them are considerable.
The next step in fintech?
Global FinTech has seen large investments poured into Bitcoin and Blockchain technology, which shows that investors are paying close attention to these new areas of financial technology.
Many companies that want to enter the financial market start with payment services that help customers save transaction costs. By providing better services, they increase the retention of target customers. For payment applications, the main battlefields are in the United States and Europe. In recent years, more investment and applications have risen in the Asian market. Two other important applications related to payments that cannot be ignored are machine learning and biometrics. These two applications can help us improve financial security.
Because multiple transaction methods and increased volume of transactions have increased the risk of being attacked during the transaction process, security mechanisms for payment should be improved. 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.
The demand for biometric devices for financial applications in 2015 was 4.7 million units, and the overall demand is expected to reach 43.7 million in 2024. Software and hardware output value will also increase from US$126 million in 2015 to US$2.2 billion in 2024. The Asia-Pacific region has shown 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 with smartphones. There are also credit card companies that use voiceprint recognition systems for online card swiping services. Palm vein recognition technology has been introduced by banks for use at ATMs. Market growth momentum of biometrics technology is high, and biometrics will be applied to financial services in many practical ways. Biometrics technology will gradually become mainstream in the market.
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 is collected. Accurate, big data analysis of this information can be used to create a master plan for diversified customers, and innovative financial services can be presented to these customers.
The problems faced by the FinTech market and future challenges:
Although financial technology has made a huge impact on the traditional financial industry, it has also created a new industrial ecology with new business models. In future emerging markets, there will be no 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 measuring risks when applying to companies for services. But these new trust mechanism may trigger issues of privacy rights infringements. How to break through users' guards so they are willing to provide private information for enterprises to use is still a problem that needs to be solved.
On average, every 10 years IT technology has a breakthrough that provides service models with high service quality and the ability to expand customer benefits. However, users are often hesitant to use these new technologies and services, even if they know that these new technologies will provide faster, cheaper, and safer services than the original technologies. Users will not easily change their existing behaviors to embrace new services unless they have a clear understanding of the difference between the new and the old services. Therefore, FinTech needs to consider how the new service can strengthen and enhance the user’s experience.
Regarding the maturity of data analysis technology, different industrial fields will have different domain expertise. Data analysis needs to consider how the technology can effectively deal with different industrial environments, unique organizational cultures, organizational structures, and internal activities. A comprehensive evaluation of important key points extracted from this big data will help decision-makers make intelligent judgments. Data analysis also focuses on how to combine market demand with effective industry business models.
On the whole, FinTech development has shifted from the reliance on humans in the past for financial services, to the use of technology for financial services and for other diversified non-financial services. Combining key technologies such as blockchain, big data analysis, machine learning, biometrics, and artificial intelligence, there is great potential for future development of application services. If you can master these key technologies, it will help you enter these emerging markets and recognize future market patterns.