Fintech (an abbreviation of financial technology) is an umbrella term for any kind of technological innovation used to support or provide financial services. It is creating many changes in the financial sector and giving rise to a range of new business models, applications, processes and products. The traditional banking sector is undergoing a vivid transformation in which the financial start-ups are playing major roles. There are also Fintechs which distribute insurance or other financial instruments or provide third party services. While most companies in the Fintech companies in the Fintech industry have certain features in common, there are many companies in the start up phase. FinTech is changing the types of financial services available, who can access them, and how. Alternative finance such as peer-to-peer lending allows consumers or firms to obtain loans without using a bank. Data analytics can be applied to an individual’s financial data to give them low-cost automated financial advice on new payment methods, such as applications, allow transactions to be made with a Smartphone distributed ledger technology (e.g. blockchain) enabling new ways of recording and executing transactions.
Due to the introduction of a plethora of data, fintech start-ups have gained significant traction. By introducing innovative ways, they are successfully offering products and distinctive solutions for consumer demand. Banks by collaborating with Fintech will be able to harness a full potential of technology and will cater to the technological sensibilities of digital savvy users. EY FinTech Adoption Index 2017 released in June 2017 indicates that the appetite of digitally active consumers has risen considerably, from just one in seven digitally active consumers in 2015 to one in three in 2017. The report also shows that in 2017. There are 84% consumers aware of the fintech facilities in comparison to just 62% in 2015. The same reports show that the fintech adoption rate is expected to reach an average of 52% globally from the current rate of 33% in 2017.
Based on the new report by CB Insights, Goldman Sachs, Credit Suisse and JPMorgan are three most active banks when it comes to M&A activity in the fintech space, while the largest fintech investors are Citibank, and again JPMorgan and GS. In terms of investment, the report showed that each of these banks has a preference within the fintech area. For instance, the report shows that JPMorgan (particularly of late), has been focused on payments, while Citi, the top investor in fintech among the banks, has moved beyond fintech into other areas like security and e-commerce. Goldman Sachs has been focused on lending. The SWOT and PESTLE analysis of Citigroup details insights into the internal and external factors influencing the Group’s growth and talks about fintech’s growing importance in today’s banking sector.
Various esteemed banks are betting big on Fintech as maximum usage of Fintech is happening along the lines of payments and money transfers. Financial firms are largely benefiting from the digital support they are obtaining from the fintech companies. Banks in collaboration with Fintech companies aim towards a data driven approach with lesser costs, low redundancy and increased efficiency. Banks can significantly reduce structural costs, provide employees more time for value-added tasks, and enable enhanced regulatory compliance along with the highest level security hence improving the digital experience of the customer by introducing new technologies like machine learning.
Citigroup has created an individual unit to invest in Fintech start-ups. The new venture – operating in the US banking giant’s credit markets, municipal securities and securitised-markets groups – will invest in firms developing new trading infrastructure technology, data analysis, machine learning and artificial intelligence. CITI CEO Michael Corbat revealed that his firm spent 8 million dollars on tech in 2017 which pushes the firm into a high end digital age. The CEO is confident that the heavy investment will reap its benefits and investment in avenues like mobile and internet banking will allow CITI to accumulate savings in bank networks.
Understanding customers’ tastes is today the basic principle that governs global marketing. It’s no different as far as mobile banking technology and Fintech are concerned. Fintech app integration with personal applications, including social media, establishes the strongest possible relationship with the user. As a result, financial operations are more enjoyable and bring people closer together. Hence Fintech has turned into a significant initiative that is taking the financial world markets by storm.
Mar 24, 2020
Sep 24, 2022
