What Is FinTech And Its Challenges?
These days, we all use smartphone devices to handle daily tasks. For example, it can pay bills or recharge your card and also transfer money as well as buy products online.
All these works can be done with the help of applications installed on the phones. These applications are a necessary part of financial technology (fintech) that has made people’s lives easier and faster.
In this article, we will discuss the concept of financial technology, its history, the importance of its security, and its future in the world.
What is financial technology? Fintech refers to the integration of financial services with cutting-edge technological advancements. The term encompasses the various innovative technologies that have disrupted traditional financial processes and practices in recent years.
These technologies have transformed the manner in which individuals engage in financial transactions, including shopping, money transfers, investments, and borrowing.
Additionally, some elements of fintech pertain to the dynamic and evolving world of cryptocurrencies. The overarching objective of these technological advancements is to offer streamlined and intermediary-free access to financial resources, enabling more efficient management and transfer. History of financial technology The concept of “fintech” may appear novel, however, its origins can be traced back to the introduction of credit cards in the 1950s, automated teller machines (ATMs), electronic exchanges, and online exchanges.
During the 21st century, the term was utilized to describe the computer hardware and banking systems that enabled data exchange among different branches. With the widespread adoption of smartphones and the Internet after 2010, and the development of software and applications, individuals are now able to perform tasks that were previously only achievable through financial institutions and banks.
Today, fintech presents a significant challenge to the financial services and banking industry, as new companies emerge to offer alternative methods for financial transactions.
How has technology challenged the traditional financial system? Financial technology has triggered a significant transformation in the realm of financial transactions, thoroughly disrupting the conventional financial system. In the past, executing financial or commercial transactions required a physical visit to a financial institution or bank. For instance, purchasing insurance necessitated a visit to an insurance company, while money transfers required a trip to the bank.
However, the advent of mobile applications has enabled these transactions to be performed with ease. Technology has challenged the traditional financial system, which was reliant on intermediaries, and has resulted in a shift towards decentralization. This has facilitated the democratization of financial operations across various sectors, resulting in a reduction in time and costs associated with these transactions.
How does fintech work? Fintech represents a comprehensive solution for enhancing financial transactions. By utilizing fintech, both consumers and businesses can expedite and streamline their financial transactions, without encountering complexity.
Additionally, fintech encompasses artificial intelligence, blockchain technology, and big data, which have significantly improved the security and privacy of the transaction process.
For instance, mobile platforms such as Venmo and CashApp allow for convenient and timely payments to other individuals, as well as straightforward money transfers to their bank accounts. Conversely, traditional payment methods such as cash or check require the recipient to physically visit a bank for deposit.
How safe is financial technology? According to a Forbes report, fintech companies are widely trusted by consumers, with 68% of individuals expressing trust in financial management tools provided by these firms. However, some have expressed concerns about the lack of security regulations for newer fintech applications. It is not a matter of distrusting fintech companies, but rather exercising caution, as the advantages of utilizing fintech outweigh the perceived risks for most consumers. The adoption of financial technology continues to expand, with approximately 64% of the global population utilizing fintech technologies by 2019.
Currently, banks and major financial institutions are either acquiring technology startups or introducing their own fintech offerings to the market. It is evident that financial technology will play a crucial role in our daily financial lives in the future.