Why FinTech will change our banking habits?
Technology has changed our lives in many regards. After the music, news and tourism industries, it’s now the turn of the banking sector to undergo a digital revolution. Indeed, the banking world has changed more over the past decade than it has in 200 years. The main actors of change are Fintech companies. But what does the word Fintech even mean?
FinTech is a word combination of finance and technology. A Fintech company is an innovative start-up – sometimes a subsidiary of a traditional company – that uses technology to deeply transform the rules of the finance industry, including merchant banks, retail and credit banks, means of payment and insurance activities.
From crowdfunding to mobile payment
There are four main kinds of Fintech companies. The first, and the most mediatised, category is crowdfunding. On a dedicated online platform, people can finance businesses or artistic projects. They can make a donation (with or without rewards), get shares in the company being funded and lend money to businesses or individuals (peer-to-peer lending).
In the second category, we have mobile applications and platforms that enable users to manage their financial transactions such as keeping an eye on their expenses or selecting investments – all from a mobile device or a computer.
The third category includes virtual currencies. The best-known virtual currency is the bitcoin system. With this digital currency, created electronically instead of by a central bank, users can directly exchange money. Other virtual and decentralized currency systems exist on social media and e-commerce sites, such as the Facebook credits and the Amazon coins.
The fourth and last category includes electronic payment systems for smartphones and websites, available in retail stores and on e-commerce platforms. The best-known system is Paypal. Through Paypal, you can make purchases or receive money in a secure way without having to transmit your bank details.
These four categories are, however, only the tip of the iceberg! Fintech companies are active in other areas such as scoring (rating program evaluating the risks of a loan to an individual), banking advice or even assessments of investment funds.
Are Fintech start-ups killing banks?
Fintech start-ups are often represented as dangerous competitors for traditional banks. But is this really the case? Not necessarily. By developing more and more services to the detriment of financial institutions, Fintech companies force banks to reinvent their offer and their client relationships. By adapting to the current digital revolution, banks will be able to offer a valuable mix of digital technologies and human contact.
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