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How is Fintech Revolution Challenging Conventional Approach to Finance
10.10.2018

In the recent years, fintech has indeed changed the landscape of financial services industry. Such developments as artificial intelligence, robotics, biometric applications, blockchain etc. have created prior unseen opportunities for institutional and private users. The market is now offering a range of entry possibilities, which has caused companies and start-ups to begin developing advanced and complex solutions, such as PayPal and Alipay. For instance, the customers of PayPal can send and receive funds in any currency of their choice. Another advantage of the service is the option of currency conversion. This and other reasons have led numerous actors of the financial industry to use PayPal on constant basis. As a result, fintech revolution has brought more convenience and simplicity to the prior lengthy and difficult financial procedures.

Lets closer examine the new possibilities that the growth of fintech innovation has opened to the world.

Robo advisory

The concept was developed in order to provide finance-related advice, while minimizing human intervention that can often cause errors and inconveniences. The technology involves complex algorithms that exist automatically and do not require constant human presence. When looking at the stock market example, there have been many issues related to intermediaries, who did not always perform effectively. Robo advisory gives investors an opportunity to access the stock market in a simple and transparent manner. This was the efficiency and traceability of transactions also increase.

Alternate lending

After years of experience banks have conducted that lending to small businesses is an unprofitable activity. Fintech stepped in, creating a peer-to-peer lending system, which is based on mutually established terms and usually occurs under low-interest rates. With the support of investors, this became crucial for the growth and development of emerging markets. Developed nations have also benefited from such services as payday loans, money orders, mortgage loans, refund anticipation loans, car title loans etc., that are also helpful for numerous households.

Blockchain

When an online transaction occurs, third-party validation is a necessary step for its execution. Blockchain was developed in order to challenge this procedure, while also providing overall increased security. The technology achieved success and acknowledgement when Bitcoin, an underregulated crypto-currency, was introduced. Blockchain was the core technology behind the mining of Bitcoins, which is a peer-to-peer transaction verification procedure. In simple words, it is a payment made from one party to another via a decentralized network. Blockchain gave rise to the numerous fintech start-ups that focus on storing, sending and exchanging Bitcoin and other crypto-currencies.

Digital payments

This refers to fast and convenient payment services providers resembling PayPal that we have previously mentioned. In the case of PayPal, the only thing necessary for execution of incoming and outgoing transactions is a valid email address. The successful operation of this and other similar services are leading to the decline in volumes of ATM services use in favor of digital payments. For instance, in India there has been a rise in the use of mobile payment apps and mobile banking. The same is projected to happen in other developing nations in the near future, which is crucial due to the population numbers in those countries.

In order to receive a stable place in the existing market, financial services must be sustainable and convenient. However, there are various external factors that can affect the capitalization of financial industries in remote locations. The primary cause is the lack of service that greatly decreases business opportunities in those areas. This is also the reason why it is suggested to invest in the mature market, in order to compensate potential losses in revenues from certain locations.

To conclude, the fintech revolution is evolving and spreading rapidly, giving birth to new spheres and actors in the financial industry. Among the most certain projections is the rise in use of mobile and card payments, which will inevitably lead to the reduction in use of cash. The world is very likely to see more fascinating advancements in the exciting future to come.