‘FinTech’ is a phrase increasingly banded about in the media and in technology circles. Despite being widely used, it’s a term many – including tech savvy and knowledgeable entrepreneurs – don’t quite have a handle on. So it’s no surprise the term tends to be used in the wrong context.
A new buzzword
FinTech is radically changing our social and business environments. By that we often understand IT start-ups disrupting sectors such as mobile payments, money transfers, loans, fundraising and even asset management. Start-ups use technology to offer existing financial services at lower costs, and to offer new tech-driven solutions. At the same time, the boom of FinTech provides new opportunities for consumers and entrepreneurs alike. Companies can offer services at considerably lower costs, while the range of consumer finance products is wider than ever.
FinTech company types and expansion
The term is usually associated with start-ups that break into areas traditionally dominated by banks and other financial institutions. However, it also relates to tech companies, traditional service providers, and other market players. Globally those are large, well-established financial institutions and big tech companies (Google, Yahoo, Amazon etc.) active in the financial services. Those are companies that provide technology infrastructure for financial services transactions. Amongst them are the so-called “disruptors” – fast-moving companies, often start-ups, focused on a particular innovative technology or process. 
The technological progress has helped FinTech expansion. Progress is evident in mutual lending, non-bank loans, investment, accounting, personal finances, personal investments, crowdsourcing, payments, R&D and financial advisory. Even new currencies such as Bitcoin, have come about as a result of this progress. Some of the most popular tools are non-bank loans, crowdsourcing and money transfers. The rapid increase in the popularity of mutual lending platforms brings together lenders and borrowers. Crowdsourcing grants fast and easy access to financing from previously unknown people from around the world for some brilliant idea.
Cross-border money transfers, which caused quite a headache for entrepreneurs, are yet another area that innovators have completely transformed. Cross-border money transfers, which is a traditional (and expensive) banking area, was turned upside down by TransferWise. Now small companies and private individuals can transfer money much cheaper than before. Another area is non-bank loans – you can access them quickly and easily, yet the lending process is responsible.
At the backbone of FinTech growth lays rapid development of information and communication technologies during last decades and the possibilities FinTech creates. This, in turn, influences the financial habits of people – how they transfer, receive, borrow, spend and invest their money.
Significance in the modern business world and future prospects
Even though globally two thirds of bank clients use FinTech products or services, some are still faithful to traditional banks and their services. Undeniably they both have their advantages. Research shows the advantages of FinTech are agility (immediate reaction to changes in market demand), innovation and ability to attract digitally-savvy customers. Their services are used by those in favour of speed, convenience and ease of use, while banks value direct communication with their customers.
This is not going away and will only deepen. FinTech has become the “new normal”. Over the long-term, financial institutions are going to have to make some fundamental changes to their operations and adapt faster to modern requirements. Most of them still struggle with finding and implementing innovative ideas. In fact, they can learn from disruptors. Banks consider them competitors, but instead cooperation could be mutually beneficial.
Some twenty years ago it would have been unimaginable that it would take a company less than ten years from zero to rapid expansion. It took 8 years for 4finance to transform from a start-up into a successful global business with more than 2,000 employees in 17 countries across 3 continents, serving millions of customers. Each year 4finance is investing millions of euros in the development of IT systems, which are the backbone of FinTech sector. This is not money wasted. It is an investment for future growth.
FinTech may be a new kid on the block, but this kid has proven herself to be a future business model, which will force “old” market players to adapt and will provide guidance to the new ones.