Major types of FinTech
All financial institutions are using financial technologies, be it a financial startup, tech or even legal company. Startups provide financial services to cut costs by offering new tech-driven solutions, other companies use fintech tools in insurance, banking, lending sectors to name a few.
The term Fintech is now a kind of buzzword when we describe with this word a sector itself. Today, it’s not a sector, but rather a generic notion of all fintech services in many sectors. It describes any service that relates to the facilitation of monetary transactions or the management of such transactions.
It’s a must for CIO to be like a fish in the water among the plethora of categories of fintech. This knowledge provides you with a deep understanding of tech processes and allows you to hire real experts.
The infographic below illustrates the most common types of Fintech that include all the aforementioned.
As the world of digital payments between B2C and B2B is now evolving like never before, cash remained as a rudiment of our past. We got used to making payment in a few clicks just sitting at home and without dealing with a bank.
With payment gateways, the payment process becomes more easy and accessible to all. People can make transactions without a third party – bank, that allows removing high bank fees. At the same time, the implementation of Blockchain services ensures operational security.
E-wallets as another type of payment app make your smart device a convenient payment tool. There is no need to keep dozens of credit cards and paper money to pay for all your needs. Encrypted data guarantees that your info won’t be sent to third parties.
Digital banking as an electronic version of offline banks has changed dramatically in recent times. Now you don’t need to even enter a bank to complete a transaction. Working hours, physical presence are not obstacles at all.
But the creation of online banking is not the final step of fintech implementation. There are lots of ways to develop: automation, smart technology’s implementation, blockchain to secure transactions, virtual banking to name a few.
Cryptocurrency & Blockchain
As one of 5 fintech challenges, Blockchain has the potential to turn the fintech experience around. Being a distributed decentralized ledger, Blockchain enables its nodes to record transactions on a public block, thus creating a chain.
Every block contains a hash of the previous block. Once the block is validated, the hash updates its local copy of the database. That’s why it’s impossible to take the block out of the chain without destroying the whole system.
This technology has immense importance for fintech by ensuring a high level of security, reducing operational costs, and eliminating the need for a third party in the transaction.
Enterprise Tools & Software
There are two main types of these tools – SaaS and POS.
SaaS (or Software-as-a-Service) means that access to the software is provided on a subscription basis. The software is located on the external servers and can be accessed from everywhere. With SaaS, there is no need to install or update the software, as long as users log in through the browser and connect to the service provider’s network to access the particular service.
POS (or Point of Sale) as a cloud-based software gives you complete control over the transactions. Offline transaction mode automatically syncs with the store once the point gets back online.
The insurance sector requires innovations. Blockchain, automation, chatbots, cybersecurity, AI – all these technologies are used to improve customer experience, minimize human factors thus optimizing companies’ performance.
For insurance companies, it may be hard to assess different risks to estimate the cost of the insurance policy. Using blockchain makes the relations with customers trustable by removing information about illnesses from medical cards or about accidents of the car seller.
Regulatory issues are one of the most concerns in financial services. Regtech provides a more efficient and effective delivery of regulatory requirements of the companies.
Compliance, risk management, regulatory reporting – all those processes can be covered using RegTech. RegTech firms primarily deploy SaaS Technology and Cloud Computing to aid companies to efficiently comply with current financial regulations.
Being one of the most useful tools for new entrepreneurs, crowdfunding showed a new way of how to raise money.
Can be split into 4 branches:
- Rewards-Based financing
- Donation-Based Financing
- Equity-Based Financing
- Debt-Based Financing
The use of crowdfunding gives users new experiences apart from online banking. It allows individual entrepreneurs or businesses to use a specific location to make funding from other sources. Increase, allows startups to directly reach out to investors for support rather than trying to secure loans from banks.
We have listed 7 widespread types of FinTech apps. All of them have the goal to facilitate business processes as well as improve customer experience. And these benefits are still expanding to be useful for more startups and financial companies.