What is financial technology?
Financial technology, commonly referred to as Fintech, encompasses a range of businesses utilizing technological advancements to enhance and streamline financial services and operations. This rapidly expanding industry includes various sectors, such as mobile banking, insurance, cryptocurrency, and investment applications. Fintech has the potential to bring benefits to both individual consumers and businesses in various capacities.
The growth of the fintech sector has been significant. Notably, in 2021, fintech startups secured unprecedented levels of venture capital funding, signifying the considerable potential and confidence within the industry. This growth can be attributed in part to the increasing involvement of conventional banks, which have started to adopt fintech by either investing in, acquiring, or collaborating with fintech startups. Such collaborations enable these banks to offer improved services to customers who prefer digital solutions while also keeping pace with the evolving trends and innovations in financial technology.
Financial technology (Fintech) Explained
Fintech is often perceived as a contemporary phenomenon, which is not completely accurate. Despite its rapid evolution in the past decade, this progress is mainly attributable to broader technological advancements that have been progressively merged into the finance sector.
In fact, financial institutions have long utilized technology to enhance efficiency and reduce costs, as demonstrated by the introduction of the first automated teller machine (ATM) dating back to the 1960s. Even preceding ATMs, the beginning of credit cards revolutionized the payment landscape in comparison to conventional modes such as cash and cheques.
The underlying technologies supporting fintech business models contain a diverse range, including blockchain technology, artificial intelligence (AI), machine learning, and other data-centric functionalities like robotic processing automation (RPA). Each of these applications serves a distinct purpose. Yet, collectively, they reflect a concerted effort to dismantle the historically sheltered status of the financial services sector, which has been subject to rigorous regulatory oversight.
Fintech in India
In India, the fintech industry, portrayed by the absorption of technology in the provision of financial services, has witnessed rapid evolution. With the second-largest population of internet users globally, India promptly adopted financial technology, hence demonstrating itself as one of the fastest-growing fintech markets worldwide. Remarkable sectors within the Indian fintech sector include digital lending, digital payments, insurtech, wealth tech, and blockchain, among other significant domains