Today, almost all of us make payments through the apps on our smartphones. We don’t have to spend hours at the bank collecting a lot of paperwork to open an account or apply for a loan. Fintech, which has become very popular especially in recent years, facilitates all these processes. So what do we need to understand from this concept? What do fintech startups do, what benefit do they focus on? You can find answers to many more questions like this in the following lines.
What is Fintech?
If we briefly define this concept; We can say that financial services become automated and restructured as a result of the combination with new technologies. In this way, both companies and consumers have the opportunity to manage their financial transactions more easily. At the same time, this innovation stands out from the traditional financial services with its low cost and high service quality. When it comes to financial services, although banking comes to mind first, insurance and other brokerage services are also among them.
Financial technologies whose basic features can be summarized as flexibility, speed, and individuality; In addition to transactions such as money transfers and payments, investment management, it also covers the use of cryptocurrencies such as Bitcoin. In addition to all these, the problem of trust is considered a strong obstacle to the adoption of Fintech. Because consumers are not keen on the data-sharing offers of companies, but at the same time are concerned about the possibility of sharing their information with organizations independent of the industry.
The Emergence of Fintech
The global economic crisis of 2008 caused major ruptures in the financial sector, causing a series of changes in this area. In this process, many new regulations were made, with the principles of customer protection and transparency gaining importance. With the development of mobile devices and changes in customer behavior added to this, so did the developments in digital finance. Thus, after the crisis, the concept of Fintech emerged in the same year. Initially, this was used in the server application systems of banks and intermediary institutions but later shifted its focus from B2B to B2C by shifting its focus to the consumer. Today, there are initiatives in which both are adopted.
What Kind of Ecosystem Does Fintech Have?
In general, we can explain the main elements of the fintech ecosystem as follows:
Fintech startups aim to offer innovative solutions to the financial sector based on new technologies. While these stand out with more transparent and personalized services by focusing on the needs of consumers; It is also preferred by SMEs due to its low cost and quality service. According to the 2019 EY Global FinTech Adoption Report, it is estimated that the global usage rate of SMEs will reach from 25% to 64%.
The commercial regulations of the government agency can affect the ecosystem positively or negatively. For example, lowering taxes or simplifying regulations causes a positive reflection; The strict implementation decisions taken will undoubtedly have a negative effect. Therefore, we can say that the state plays an important role in promoting these initiatives.
This innovation, which was initially perceived as a threat to traditional financial institutions, gradually began to be seen as an opportunity. Companies that anticipate that those who do not renew themselves will succumb to time, as in every field, prefer to cooperate with these initiatives. In this way, it can produce new services with lower costs and highly competitive value. “Is Fintech a threat to traditional companies?” It is a realistic answer to the question.
Financial customers are at a very important point in the ecosystem. Because, as we mentioned above, they constitute the focal point of these initiatives. Companies that increase the success rate in the sector by developing personalized services for the needs of the customer also gain new customers.
Technology developers, on the other hand, take advantage of new technologies such as artificial intelligence, cloud computing, APIs, blockchain, big data, and IoT in this system and create new solutions for the sector. In this way, for example, our refrigerator can shop for the food itself and transfer money via mobile payment.
What Benefits Do Fintech Initiatives Focus On?
These initiatives, which offer innovative solutions to the financial sector by using new technologies, are basically based on the goal of “facilitating financial processes”. While these, with a completely customer-oriented approach, allow consumers to perform their transactions practically and quickly by improving the current service conditions; On the other hand, it creates new solutions for consumers who cannot get traditional banking services.
While approximately 2 billion people in the world do not have a bank account, these people find the opportunity to benefit from digital finance services with Fintech. We can give an example of this M-Pesa mobile banking application, which is used in an estimated 96% of homes in Kenya. Thanks to this application, transactions such as getting credit from the bank, paying bills or money transfer can be done easily using only the phone.
Providing cost and time savings by shortening the process processes; making financial services accessible to every person with a phone and internet; We can clearly say that all the advantages of Fintech, such as providing a more effective and automated financial management by making personal recommendations to the consumer, are actually aimed at facilitating these processes. Apart from that, blockchain technology seems to accelerate the development and spread of Fintech by filling the gap in data security.Share this article