Fintech is a word that emerges from the union of two terms: Finance and Technology. These are companies that offer their customers innovative financial products and services through the use of ICT technologies.
These startups use financial technology as a means to reduce costs and simplify processes, resulting in efficient internet service for the user, while generating lower commissions in relation to traditional systems.
The financial sector is always evolving and adopting new technologies. Banks, brokerage firms, finance companies, and insurers are constantly reinventing themselves to meet the requirements of the digital age that demand profound and long-term changes in the way institutions relate to their clients.
With the explosion of financial systems through the internet, numerous fintech business models have been generated that aims to streamline the financial operations of businesses, companies, and individuals through financial technology-based platforms.
There are many categories of Fintech, which we know as verticals: loans, payments, advice, and within all these fields of Fintech, there are other subcategories. As an example, within the loan category: Crowdlending, Crowdfunding, P2P Loans, debt compensation.
The most crucial facet of these verticals specialization is: each Fintech category is designed only to a specific service, that response to a particular and financial need. All the dedication and efforts of a Fintech team are dedicated to a single goal.
For all these reasons, the new demand for Fintech solution is evolving every day that digitally develops existing financial software or create new products or services.
Among the top fintech software development sectors there’re the main 5:
The Fund Raising module is the management of the System that allows members to take funds to manage savings, manage services or automate collections, both in freely available services or term services with differential rates.
For this, there are 2 different modalities: Variable Mutual Savings and Term Mutual Savings.
Variable Mutual Savings module allows the deposit of cash or securities to be affected to the service of Variable Mutual Savings (as a savings account). Mutual Term Savings module is a capital deposit system for a stipulated term, accruing incentives at the end of the period.
Financial advisory platforms
Also known as the Theft Advisor. The technology used by various Fintech in this area has allowed automating the processes of financial advice to SMEs, startups, private users, etc. The reduction of costs and the elimination of commissions for advice have opened a wide field to investors with fewer resources. In other words, you don’t waste time and only pay when you hire a service.
Many users are emotionally involved in managing their investments. As a result, they want to buy or sell money at the wrong time. Robo-Advisor can instead offer a completely data-driven, emotionless investment opportunity and a risk analysis on this basis. Robo-Advisor is offered by companies that are either pure financial intermediaries or asset managers.
The robo-advice system uses a systematic, largely automated process to give people access to professional wealth management advice. In Robo Advice solutions, the user initially goes through a process to find out how much risk he wants to take on his investment. The result of this test shows the so-called risk appetite of the investor. However, this is exclusively a pure consulting service.
Furthermore, Robo-Advisor protects investors from making wrong decisions. They select investment products, propose strategies, and take care of the transaction without having to contact a consultant. They also undertake the monitoring and adjustment of financial portfolios. The Robo-Advisor may, therefore, at its sole discretion, make decisions and adjust the client’s portfolio accordingly without having to obtain client approval for each transaction.
Payments and transfers
These are fields that managed to break the monopoly of banking entities, creating better money transaction mechanisms with lower costs. Some examples are Transferwise, Kantox and Flywire.
Digital payment methods prevent the use of cash and cards (plastic). This category is highly developed by all current financial actors, including traditional banking. Paypal is the BigTech of electronic payment and is the queen of online payment intermediation.
Electronic payments are growing exponentially; mobile transactions are greatly helping that development. Platforms such as PayPal, Payoneer are an example of the importance of Internet payments in the financial sector.
Electronic payment is probably the most developed Fintech category, but new developments and creations continue to appear given the strategic importance of payment in the financial sector.
This term refers to loans made and offered by natural individuals without the intervention of banks or credit agencies. It is based on direct treatment between the parties involved, through an online platform that performs the function of an intermediary.
The future is difficult to define and even more so in a sector such as finance where technology and digitalization have broken into force. It is very likely that Fintech will successfully collaborate or be absorbed by financial institutions or BigTech. In the latter case, in more specific areas, such as payments and financing. It is also possible for certain Fintech to join (creating clusters), and even Fintech already consolidated to continue their journey alone focused on their golden egg hen.