Investors and borrowers are highly interested in Fintech and its incredible potential. This new type of financial service is bringing a new edge to the banking sector as a whole and gives different types of clients the convenience to find competitive, advantageous services.
Simply put, Fintech is the implementation of technology in financial services. Until now, this new delivery method of banking services improved and automated their transfer and use, and also brought a competitive side to the sector. Over the past several years, Fintech transformed the sector to its core. Today, it doesn’t resemble the banking industry we interacted with a decade ago.
There are numerous banking apps, peer-to-peer lending services, and robo-advisors that make us think differently than we used to in regards to loans and money. Crowdfunding apps and platforms but cryptocurrencies as well bring improvements. Crowdfunding apps and platforms but cryptocurrencies as well bring improvements.
The Beginnings of Fintech
The new implementation of technology in financial services has its roots after the last financial crisis. The high number of job losses, bankruptcies and dropping share prices started what was about to change the sector forever. New, harsher regulations emerged and were designed to prevent similar financial catastrophes from happening in the future. The main goal was preventing big financial conglomerates or banking institutions from having a monopoly in the sector and damaging the global economy in the event of a similar situation.
Since then, the number of regulations available multiplied sensitively, and this led to a growing number of direct investments of banks in following through with those. As a result, banks fell behind with investing in technology, automation, and innovation.
Smaller banks emerged on the market during the same interval and increased the competitiveness levels of the sector. These, on the other hand, put multiple resources in embracing innovation and automation in their internal processes. Some even developed self-service platforms for tech-savvy users. Today’s baking environment is dominated by similar apps.
For traditional financial service vendors, Fintech the perfect opportunity to contribute to the development of the sector without investing in in-house development services. Fintech, in this day and time, is developed through outsourcing and the change is mainly pushed by dissatisfied consumers who want more flexible and innovative services from traditional banks.
From Shy Players to Sector Leaders
The new financial revolution is undeniably based on Fintech, entirely. The convenience and flexibility of tech-based financial services rapidly attracted investors in different sectors. This made them contribute to further developments and client base development of these new players, making them some of the most powerful and prolific lenders and banking institutions out there. Major investment banks like JP Morgan Chase put into IT services $9.5 billion, only in 2016. Out of those, $600 million were directed to Fintech initiatives.
The new financial revolution aims to meet the demands and needs of the digitized consumer, in a growing digitized context. More personalized banking products and services emerged, as a result. The business consumer has new loan options to choose from, more competitive products and flexible interfaces to meet their new needs and requirements. Private loan consumers are met with a wide and more competitive offer in terms of loans, mortgages and application protocols.
In 2017, the PWC statistics showed that venture capital investments in the sector reached an impressive $22 billion in the previous year. Most investments were distributed in America and Asia. In Europe, London is still the Fintech capital, in spite of the uncertainties surrounding Brexit.
New European Fintech development hubs have lately emerged in France, Germany, and the Scandinavian countries, but also countries like Israel.
Loans in the Fintech Context
In 2018, the personal loan market reached an all-time high, and the major peak seems to be generated by Fintech. The personal loan market reached in 2018 an impressive amount of almost $140 billion, 17% higher than the previous year. The TransUnion data shows that almost 40% of the total of Fintech loans were taken out from Fintech players.
Business loans also have a new image and status when it comes to financial solutions for SMEs. Traditional banking institutions seem to retreat from financing SMEs, by implementing severe collateral and a guarantee system designed to reduce the ability of new business players to access and enjoy viable banking solutions. Fintech takes over the matter, making it easier for new enterprises to access and use financing products, in their first few years of activity.
What makes Fintech players so popular among businesses is how easy and affordable financial help they can find in new banking solutions is. With online applications and fast application analysis capabilities, Fintechs seem to be the perfect answer for a growing number of businesses in need of fast and reliable banking solutions. Also, these players’ products and services are typically faster to process and more convenient than endless trips to a local bank and an endless supply of papers and documents usually inquired by traditional banks.
What Has 2019 In Store for Fintech?
In 2019, we should expect to see automated technologies in the banking sector used at a new, more ample extent. But we should also account the GDPR data protection protocols and policies, and growing demand for a digitalized user for flexible and streamlined services and products.
Blockchain and cryptocurrencies also bring Fintech under the spotlight pushing it to become more competitive and invest in new, more innovative technologies and processes. The new finance environment seems to become more and more polarized. The forces and players reshaping Fintech and the need for higher sustainability levels in the sector are the main change drivers. Sustainable investing seems to be the next big trend in the banking sector. Consumer needs and preferences change and develop, and new target audiences emerge: young, educated women, millennials of different genders and ages, with different needs, new small enterprises looking into affordable and flexible financing solutions, all these categories seem to bring Fintech and loans on the brim of change.
But until then, Fintech remains the main player in the new financial revolution, and it is here to offer new and better banking solutions than ever before.