What Is Fintech (Financial Technology)?
Fintech, as it is more often known, is a term used to describe emerging technology that aims to enhance and automate the provision of financial services. At its foundation, fintech uses specialized software and algorithms that are employed on computers and, increasingly, smartphones to assist businesses, company owners, and individuals in better managing their financial operations, procedures, and lifestyles. The term “financial technology” is combined in the phrase “fintech.”
The word “fintech” was first used to describe the technology used in the back-end systems of established financial institutions when it first appeared in the 21st century. However, since that time, there has been a change toward more consumer-focused services and, thus, a more consumer-focused definition. As a result, the term “fintech” currently refers to a variety of fields and businesses, including education, retail banking, nonprofit fundraising, and investment management, to mention a few.
The creation and application of cryptocurrencies like Bitcoin are also a part of fintech. However, with its multi-trillion dollar market capitalization, the conventional international banking sector continues to be where big money is, despite the fact that the fintech sector may garner the majority of headlines.
Practice of Fintech
The most well-known (and wellfunded) fintech firms all have one thing in common: they aim to threaten, challenge and ultimately unseat established traditional financial services providers by being more agile, catering to underrepresented populations, or offering faster and/or better service.
The Widening Horizons of Fintech
Up until recently, financial services organizations provided a range of services under one roof. These services covered a wide range of things, from conventional banking operations to mortgage and trade services. Fintech unbundles these services into separate offers in their most basic form. Fintech companies may be more effective and reduce transaction costs by combining technology with solutions that are simplified.
The word “disruption” best captures how many fintech innovations have changed traditional trading, banking, financial advice, and products. Financial services and products previously only available through branches, salespeople, and desktop computers are now available through mobile devices or simply moving away from powerful, entrenched institutions.
New Technologies and Fintech
Thanks to new technologies like machine learning/artificial intelligence (AI), predictive behavioral analytics, and data-driven marketing, financial decisions will become more rational and less based on habit. The usage of “learning” applications will help users improve their natural, unconscious judgments about how much to spend and save by teaching them about their habits, which are frequently concealed from them. Using chatbots and AI interfaces to help consumers with simple tasks while also reducing human expenses, fintech is also a quick adopter of automated customer support technologies. Fintech also prevents fraud by using payment history data to detect transactions that are out of the ordinary.
Users of fintech
Fintech customers fall into one of four major categories: 1) B2B for banks, 2) their business clients, 3) B2C for small enterprises, and 4) consumers. All four groups will have opportunity to connect in previously unheard-of ways as a result of trends toward mobile banking, greater information and data, more precise analytics, and decentralization of access.
As for customers, as is the case with other forms of technology, the younger you are, the more probable it is that you are familiar with fintech and can define it precisely. Given their enormous size and expanding earning (and inheritance) potential, millennials are really the primary target of consumer-focused fintech. Some observers of the fintech industry think that the emphasis on millennials is due more to the size of that market than to the fintech proficiency and interest of Gen Xers and baby boomers. Instead, because it doesn’t address their issues, fintech frequently has little to offer to older consumers.
A company owner or startup would have gone to a bank to acquire finance or startup money prior to the development and use of fintech. They would need to partner with a credit provider and even install equipment, such as landline-connected card reader, if they wanted to take credit card payments. Nowadays, those obstacles are a thing of the past, thanks to mobile technology.
Fintech and Legislation
One of the industries with the most regulations worldwide is financial services. It is hardly unexpected that as fintech businesses grow, regulation has become the top worry for governments.
As technology is more fully incorporated into financial services procedures, these businesses are facing more and more regulatory issues. The issues might occasionally be a result of technology. In other cases, they show the eagerness of the IT sector to upend the financial system. For instance, the digitalization of data and automation of operations render financial systems susceptible to hacker assaults.
Fintech Careers
Popular occupations in fintech include more broad technological careers, such as cybersecurity and AI, and those progressively more applicable to the asset management industry: blockchain development and quantitative analysis. A fintech career path involves a strong concentration on computer science, programming, mathematics, and data science, in addition to a deep grasp of the financial industry, including financial instruments and products.
Financial businesses and practitioners must prepare themselves for industry transformation, including exploiting the benefits of both human and artificial intelligence.
The Sri Lankan Fintech market
Some Fintech startups in Sri Lanka are IFINITY, Mintpay, Insureme, Payable, Iloan, Upay, Moneyworkz, Atrad and Coffer. When it comes to the state of the digital payment industry, Sri Lanka has always been on pace with worldwide norms. Even though the island’s main form of payment is still cash, the population is gradually turning to cashless transactions because of their increased convenience. A pattern that picked up speed after the lockdowns we encountered at COVID-19 last year. Over 50% of Sri Lankans now have access to mobile phones, and over 30% use the internet. This shows that a sizable portion of the population in the nation does have access to the necessities needed to complete a digital transaction. However, many continue to worry about transaction legitimacy and safety when it comes to the transfer of money online. The local population has not fully realized the potential of Fintech in Sri Lanka.
How can Sri Lankan fintech enter its future?
Rural Sri Lankans make up more than 80% of the country’s population, thus Fintech firms should concentrate their efforts there going ahead. Fintech cannot deliver on the promise of a cashless Sri Lanka until this portion of the population makes the switch to digital. Most rural business owners are still ignorant of the potential financial benefits of utilizing Lankaqr and other fintech tools.
The first step is to explain to the customer that their phone can be used as a wallet and that all they need to do to make a purchase is scan a retailer’s QR code.