What are Fintech companies?
Financial technology companies or Fintech, for its acronym in English, are entities dedicated to providing the full range of financial services usually offered by traditional banking, only with the differentiator that technology is used to make these services more efficient and accessible products.
What Fintech Does
Financial technology (Fintech) is used to describe new tech that seeks to improve and automate the delivery and use of financial services. Fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes, and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones. Fintech, the word, is a combination of “financial technology”.
Fintech Users
There are four broad categories of users for fintech: 1) B2B for banks and 2) their business clients, and 3) B2C for small businesses and 4) consumers. Trends toward mobile banking, increased information, data, and more accurate analytics and decentralization of access will create opportunities for all four groups to interact in heretofore unprecedented ways.
Understanding Fintech (How it works)
Broadly, the term “financial technology” can apply to any innovation in how people transact business, from the invention of digital money to double-entry bookkeeping. Since the internet revolution and the mobile internet/smartphone revolution, however, financial technology has grown explosively, and fintech, which originally referred to computer technology applied to the back office of banks or trading firms, now describes a broad variety of technological interventions into personal and commercial finance.
Advantages of Fintech
- Greater accessibility. This also translates into an increase in the banked population since anyone with internet access can open an account and apply for a loan without any problem.
- Time optimization. Thanks to the fact that all processes are carried out through the Internet, it is not necessary, in most cases, to go to a physical branch.
- Cost reduction.
Disadvantages of Fintech
- Lack of physical branches. This can be a disadvantage when there is a problem in the provision of the service, since everything must be dealt with via email or social networks.
- Lack of regulation.
Example on how Fintech has been Applied in Nigeria
Banking in Nigeria remains an attractive sector, with over $9 billion in value pools, but despite high levels of competition, the vast majority of consumers are underserved. Lack of access to services, especially in rural areas, issues of affordability, and poor user experience all contribute to the frustration consumers experience right across the customer spectrum.
This has created an opening that fintechs have been quick to take advantage of, with many stepping up to develop enhanced propositions across the value chain to address pain points in affordable payments, quick loans, and flexible savings and investments, among others.
At the same time, a youthful population, increasing smartphone penetration, and a focused regulatory drive to increase financial inclusion and cashless payments, are combining to create the perfect recipe for a thriving fintech sector.
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