Whether you work in tech, finance, business, or a mix of these industries, you probably have heard a friend or coworker use the term “fintech” at one conversation or another. Over the past few years, fintech has evolved from a mere buzzword to a growing sector that is expanding its reach. But what exactly is fintech and how does it impact you?
The Basics
Fintech, or financial technology, pertains to any technology that aims to automate or streamline the distribution and application of financial services. In a nutshell, fintech is used by businesses and individuals to improve their finance-related tasks and processes. To accomplish this goal, fintech makes use of custom software and algorithms that run on these business’ and consumers’ computers and mobile devices.
Real World Applications
Perhaps the easiest way to understand how fintech works and how it impacts your day-to-day life as a business owner or consumer is to look at fintech in practice. Today, you can find a number of fintech startups that are attempting to supplant traditional financial service providers by creating and marketing alternative financial services that are more agile, scalable, cost-effective, and overall produce better results.
An example of fintech in action is the company Affirm, which aims to remove credit card companies out of the eCommerce shopping equation by providing consumers with immediate access to short-term low-interest loans for investments or purchases. Affirm also helps consumers with poor to no credit score to start building their credit history.
Another example is Tala, which is a fintech company that aims to help consumers in underdeveloped or developing nations with poor to no credit score get the loan they need for emergencies and other basic needs. Qualifying microloan applicants from countries, like Kenya, Philippines, Mexico, and India, can receive the funds instantly and also get access to Tala’s extensive library of financial educational resources, including tips to save or earn money.
Final Thoughts
While fintech is gaining traction in many industries and countries, it remains a relatively nascent sector that is constantly evolving to meet the needs and demands of consumers, businesses, and governments. By understanding fintech, its use cases in the real world, and how specific financial technologies work under the hood, you are able to better position yourself as a consumer, entrepreneur, and investor.