The rise of digital technology has dramatically altered the landscape in the financial-services sector. FinTech (Financial Technology) is today changing the face of traditional financial services. From lending money, wealth management, asset management or transferring money, FinTech is face-lifting the financial service industry. Robo advising, crowd funding and digital payments are some of the areas where FinTech has already succeeded to a great extent. Many companies are investing heavily in FinTech to improve productivity & efficiency of varied financial services.
Applications where FinTech is changing the financial services Landscape
Robo Advisers: Robo adviser is a sub sector of Fintech arena, which has received much institutional and retail interest across the sectors. Robo Advisers provides valuable financial advice to its customers with minimum to zero human intervention. Mathematical rules and various financial algorithms help robo advisers to give a good piece of advice to its clients. In simpler words, Robo Advisers gives advice for financial planning and personal investments.
Robo Advisers services include automated portfolio planning, automatic asset allocation, online risk assessments, account rebalancing etc. Robo advisors allow more people, who otherwise might not be able to invest with confidence or meet account minimums, to enter the market in a passive manner. Traditional wealth management firms charge approx. 1% of AUM (asset under management) or higher for an advise. While Robo advisor is a quite affordable advisory solution for many and this is the reason of its increasing popularity among tech-savvy people. It is preferred by younger, digital-savvy investors or those who want more privacy and control over their portfolio.
Due to Robo Advisers popularity and growing acceptance among customers, various financial institutions (insurance firm, wealth management firm, asset managers or any other) are taking robo technologies very seriously.
Crowd funding: Funding is a very important aspect of any business. Many great ideas did not turn up into a successful business and many shut down due to lack of funding in challenging times. Fintech provides a platform where customers and investors meet online and share business ideas. It helps people with big idea’s to get funds quickly and easily from any part of the world. Even if customer & the investor don’t know each other personally, an investor can provide funds for the project, the only thing matters here is a “Good Business Idea”.
The reason crowd funding gaining popularity among both investors and customers is that; a customer can get funding at a much lesser interest rate as compared to traditional financial services and the investor also earns a good profit by giving loans for a good business prospect. All these do not require an interference of any bank. Many good crowd sourcing platforms are gaining popularity and thousands of projects from all over the world are getting funded from it.
Till 2015 itself, the global market of crowd funding had grown up to USD 34.4 Billion.
Digital Payments: Transferring money in and across borders is another area that is being reworked and reframed by Fintech. Today within a minute or half, anyone can transfer or receive money at any given point of time, since service is 24/7 available. Fintech made money transfer a simple and easy task with greater flexibility. Various mobile wallets startups have been grown up into giants of payments industry due to wider and growing acceptability of digital wallet.
Global FinTech Funding Reached $36 Billion
According to the data collected by the Financial Technology Partners, an investment bank focused on FinTech, in 2016, financial technology companies around the world had raised a total of $36 billion in financing across over 1500 deals.
Payments and E-Commerce enterprises have attracted the maximum financing from investors, accounting for almost 40% of total funds raised by FinTech firms in 2016. In total numbers, Payments and E-Commerce corporations had risen over $13.5 billion, followed by banking category with $9.3 billion in financing and Securities/Cap Markets/Wealth Management firms raised $4.7 billion in 2016.
Technologies which are shaping the FinTech Industry
Artificial Intelligence: Insurance industry uses AI to process claims and detect frauds. The banking sector is using chatbots to improve customer service experience. Many firms use AI to model for capital planning as well.
Robotics: Robo advisors is the best example of how robotics playing an important role in shaping future of financial services.
RegTech technology: RegTech stands for “Regulatory technology”. RegTech technology is used in financial service to assist a business for maintaining better compliance and regulation.
Data Analytics: To collect data from varied sources and then process that data to derive some meaningful business insights is data analytics. Organizations use data analytics to understand current consumer behaviors and predict future consumer behavior.
Since 2011, the number of startups in fintech has risen more than 50 percent. According to reports, global FinTech industry grew by 11% in 2016. With new technological advancements (AI, machine learning, big data analytics, and robotics) and a growing population of tech savvy citizens, future of FinTech seems dynamic.