Aug 31, 2020

What is Fintech and why it is transforming many different industries

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What is Fintech and why it is transforming many different industries

Fintech has transcended the financial and banking sectors to begin to spread over other areas. Its way of understanding innovation and the development of pioneering solutions based on the latest technological applications has led other sectors to take its methodologies as a reference.

The concept

Fintech, compound by the words Finance and Technology,  can be approached from both a sectoral and an operational perspective. On one hand, we can consider Fintech as the industry that brings together all those financial technology companies that have been developing disruptive financial products and services only possible through technological innovation.

Check in this article the Top25 2020 Fintech CEOs.

However, this primary definition, appropriate to the beginnings of Fintech back in the 2000s is somewhat incomplete considering the current reality 20 years later.

Since then, technology consultancies and startups that base their innovation methods on the work dynamics of native Fintech companies have emerged. Every business, whether it belongs to the financial sector or not, must innovate in its digital proposal of products and services and redefine its payment and financial methods. There is no company in any sector that can ignore its financial aspect.

Innovation in the Fintech sphere

Traditional banking and financial sector have been able to perceive how they felt increasingly estranged from users and customers due to processes and methodologies that were beginning to show certain obsolescence. Excessive bureaucracy and excessive time rates reduce efficiency and effectiveness in both internal and external processes in the banking sector.

However, Fintech and Regtech initiatives tackled these problems by taking advantage of the benefits of technological innovations to not only drive digital transformation in the industry but also to innovate in the idea of how banking and finance work.

Get to know Regtech in-depth and its relationship with Fintech in this article.

In addition to promoting the birth of new areas such as crowdfunding, cryptocurrencies or automated trading, the new digital banking began to converge with traditional banking. 

Later, specific techniques were developed and the area was completely professionalized. Fintech began to acquire a series of distinct and specific dynamics for its development, identifying a series of key pillars:

  • The use of the latest technological advances (in banking and finance).
  • The development and invention of new technologies and processes (for banking and finance).
  • The value addition on current financial and banking services associated with the previous points.
  • The proposal of new financial services and products, now possible thanks to digital innovations around Fintech.
  • The optimization and reinvention of traditional processes in pursuit of efficiency, cost and time reduction, and quality increase.
  • The universalization and accessibility of financial products and services to a greater number of users thanks to the online and remote channel.

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Enabling online financial services

The development of Fintech, beyond its natural conception of reinventing and digitizing the financial and banking sector, goes through the transposition to the online sphere of the distribution of financial products and services.

Thanks to Fintech solutions, banks can now, for example, offer, with full guarantees and security, services such as loans and credits in a completely remote, online and automated way.

The convergence between Fintech and other sectors

The methodological proposal for innovation and digitization in the original Fintech organizations has permeated fully in all sectors. The key pillars and working methods that have been defined in Fintech companies have begun to be taken as a reference in other sectors.

After traditional banking, the first to adopt the Fintech work philosophy were those close to it, such as the insurance sector, investment services and later the legal area, creating the concept LegalTech.

The telecommunications industry has been one of the leading ones in assuming the dynamics and roles of Fintech companies, venturing to offer their clients financial and other related services, in addition to their usual telephony and internet services. The automotive and real estate sector (PropTech) have also assimilated Fintech philosophy to innovate and digitize.

The original Fintech companies, understanding their role and impact of their actions on finance applied to other sectors, have not only continued to innovate in the banking and financial sphere but have also moved to advise and guide companies from all sectors in their digitization processes.

Fintech establishes itself as the backbone and everyday reality of the banking and finance today so that they can no longer be understood or function without it, setting itself as the key concept for digitizing many businesses.

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eID, a leading Fintech partner

Electronic IDentification, with extensive experience in the Fintech area, has been accompanying both traditional banking and financial technology startups to boost their growth and facilitate KYC (Know Your Customer), acquisition and customer onboarding processes and all user-related operations.

Our services and innovative solutions have supported companies and businesses in any sector to boost their digitization processes and exponentially increase and globalize their sales. eID, committed to innovation, and together with leading companies in the Fintech sector, develops comprehensive solutions that are transforming user-company relationships.

Download here for free our guide on digitization in the financial sector.

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