Leaders in Global finance have always thought of fintech as a great driving force that can change entire industries. According to Goldman Sachs, the worldwide fintech pie can now reach US$4.7 trillion in its worth with more than 12,000 startups in different countries, and many more to come.
Fintech companies are growing so rapidly because of the wealthy and tech-savvy customers. Capgemini’s research has found that almost half of clients (46%) use services provided by three fintech companies or more; also 60% of financial institutions see these companies as potential partners.
Why is this sphere thriving? It has made the expansion of capital access much easier to small businesses, women, minorities, and immigrants, who previously regarded fundraising as nearly impossible; in a way, the technologies leveled the playing field.
Enhancing financial data security
It’s an enormous challenge for banks and financial institutions to protect sensitive data. With that, there are strict data privacy requirements, and the banks and financial organizations are under constant pressure to be transparent regarding policy steps taken to strengthen data protection. That’s why such companies invest in fintech – they need to protect themselves and their clients from losses due to cyberattacks.
In addition to security reasons, fintech services ensure convenient transactions, which lead to frictionless cash-flow and perfectly smooth financial operations. A working cybersecurity strategy involves encryption as well as controlled security policies. These steps ensure protection from cyber-attacks, as fintech makes it possible for businesses to monitor all the traffic and minimize potential threats.
Low-cost service
Not only does fintech dramatically reduce the costs of services, but it provides great results, too. Automatization of all processes and human-in-the-loop computing systems allow for carrying out functions smoothly. Fintech companies don’t have to waste money on archaic technologies like call centers.
They already have all the necessary information about the client in case a problem arises, so they are likely to know about it in advance, which gives fintech companies a unique ability to have a plan before it’s even needed.
New fintech companies, too, adopt multi-channel strategies and use the most advance digital marketing tools without having to pay the expensive regulation costs. Compared to banks, fintech companies only face 1% of the acquisition costs.
Blockchain in various industries
According to the World Economic Forum’s estimations, by 2027 blockchain’s net worth is expected to rise to 10% of the world’s GDP. About 90% of banks from Europe and the US are investing in this technology.
Cryptocurrencies have a large share in the fintech market, there are many startups building around the most popular blockchain-based currency, Bitcoin. Nowadays, consumers need uninterrupted control over their finances. In the past, a system that can’t be mismatched, which is not controlled by the government and with no fees was impossible to even imagine.
The app world
Digital payment is the biggest product of fintech right now, it makes up for 25% of the whole ecosystem. Almost all smartphone users make mobile payments; this is why mobile payments alone are expected to break the $1 trillion record in 2020.
There is still significant potential for growth. Because of the high fee in transactions, most American users have to lose a part of their revenue. For instance, a $100 transaction will result in $97.30 in earnings for merchants on average. Starbucks decided to try out a new approach to change this situation – their app gives the consumer an opportunity to pay using money from their bank account or credit card to avoid fees.
Increased regulations
The more fintech develops, the more concerns the governments have regarding it, and the more regulations they are trying to impose, especially with the integration of technology in the financial sphere. This has multiplied regulatory problems for lots of companies.
In many cases, regulations can be detrimental to growth, we could observe this in many sectors. They are meant to make things safer and more controllable, but this also slows things down. However, the case of fintech has been the opposite so far, and the regulations led a significant acceleration in the sphere.
In order to limit the amount of personal information that the banks have access to, the European Union has passed the General Data Protection Regulation. Some other states like South Korea and Japan also followed the EU’s example.
Hopefully, you too see the potential of fintech now and will use this information to make a smart move and invest in this amazing sector. With its promising future, fintech is a great way to gain the maximum return of your investment.
