The importance of FinTech in finance

finance education

Traditional sectors in our economy such as banking and asset management are being disrupted by the emergence of FinTech.

The rate of investment in FinTech is growing by 45 per cent annually, with £10.3 billion being invested into startups within a year. Procedures within the banking industry are likely to change in the future, with replacements including peer-to-peer (P2P) models and crowdfunding. As these markets are transforming, NEX Opportunities plan to partner with immaculate businesses that are succeeding in the FinTech industry as there is so much opportunity within this emerging industry.

Obtaining a Loan is Easier than Ever

For years, banks have had complete monopoly over how loans are given out and the procedure behind it. With FinTech growing more by the year, startups are now finding a way to bypass the bank’s procedures and provide a more efficient service to savers and borrowers. As FinTech disrupters are untied with regulators, legacy IT systems and branch networks, they can provide a financial service that’s of a higher quality. P2P models are being used by a range of startups to improve student finance and to make life easier for specialist lenders. FinTech makes the process of borrowing money easier for everyone within the financial industry, as P2P lenders approve loans within a miniscule 24 hour period with the help of a myriad of data sources.

Assessing Risk is Done More Smartly

Before FinTech took the market by storm, the loan process outlined by banking organisations were highly prejudiced, with credit risks being blown out of proportion for many. FinTech scans a large range of information from social reviews to a companies’ usage of logistics firms. From this information, FinTech can identify how successful small businesses are. Now, there is FinTech software that can amend damaged credit scores for many consumers who were affected by the financial crisis, using a wiser approach when lending money. This shows the clear importance that FinTech has within the financial industry, as credit scores are determined by a simple face-to-face meeting with a banker, with 45 per cent of loan application being denied more than once for entrepreneurial businesses.

Investment Has Been Transformed by Crowdfunding

FinTech has brought the innovative idea of crowdfunding into the financial market, allowing ordinary people to fund campaigns and projects online, through lending money or buying equity in the product/company. In the UK, we have platforms such as Crowdcube that encourage crowdfunding as a means of raising money. The public can buy into products and projects similar to how traditional investors can, although buying shares often eliminates the ability to trade once you own the project. However, Crowdcube has had ideas to pioneer a crowdfunded IPO, allowing a greater crowd of people to participate in investment.

People Can Make Easier Payments

Whilst FinTech has changed the way people can obtain a loan, it has also transformed how we make a transaction online. Cryptocurrencies such as bitcoin are being used in order to purchase goods, which businesses value as it makes transfers abroad faster and cheaper. This is made possible with blockchain software, which powers and regulates the cryptocurrency bitcoin. Having blockchain within the FinTech industry means that there is no longer a need for a middleman to authorise digital transactions, as individuals can now make faster payments whilst providing limited personal details. Once transactions are signed off by the parties using the FinTech software, they are stored in a large database that’s untouchable by anyone else, keeping all data secure.

For businesses and consumers alike, FinTech can provide a range of innovative services to ensure that all financial procedures are as simple and convenient as possible. By 2025, we can expect to see 30 per cent of current bank workers losing their jobs due to FinTech, showing its importance in today’s financial industry.