The growing use of technology has challenged traditional financial practices throughout the past two decades. ‘Fintech’ is a term used to refer to ways technology is used in the financial industry and within its services.
Traditional financial firms use these technologies to handle accounting as well as other types of services. Fintech applications have forever altered financial institutions and services and are now threatening the institutions that took them on.
As fintech has become more popularized, it has gone beyond banking and has touched real estate, insurance, and healthcare. Examples of fintech include crowdfunding, ewallets, and payments via mobile. Bitcoin would also be a perfect example of fintech.
While traditional financial establishments focus on larger corporations, fintech businesses are targeting smaller companies and startups. They provide credit as well as less conventional non-financing options for these companies. This is how these businesses get funded in a system where traditional lending practices are ignoring them.
The connection between fintech and ecommerce is that fintech has vastly improved online payment systems. For example, in places where credit/debit cards and even bank accounts are rare, fintech provides an international payment method whereby it’s easy to make cross-border purchases. Without fintech, one of this would be possible.
Ecommerce payment platforms like WePay, Dwolla, Stripe, and BlueSnap function seamlessly with ecommerce networks to make things run smoothly and to heighten security. Payment systems like Google Wallet, Apple Pay, and PayPal are also examples of fintech ecommerce platforms.
Among the more esteemed fintech applications, Blockchain digitally sends payments between two people without the requirement of a third party to verify anything. Plus, it’s anonymous. The transfer of Bitcoins and other similar currencies is possible through this tech.
Blockchain is useful for a wide variety of reasons, including giving companies an alternative that’s both digital and safe. This means that there does not need to be any paper trail.
Though fintech’s future remains to be seen, the threat that they pose to conventional banking institutions and systems could potentially put an end to the dominance of major financial institutions. Many institutions have recognized this, including JP Morgan Chase who plans to purchase WePay.
Today, the number of fintech businesses that have been bough by banks is larger than the amount of fintech IPOs. The first half of 2017 saw corporate investors participate in more than 20% of fintech venture capitalist deals. There’s no way to not take fintech seriously in this day and age.
Needless to say, ecommerce would not be the same without fintech. There’s a lot to thank fintech for however there should be attention paid to how the technology develops in the years to come.
Today’s reputation of fintech is that it has disrupted the traditional financial industry in the west and that it has brought financial services to parts of the world that only had limited access.
Tomorrow’s fintech however could be very different. Potentially, major corporate financial institutions could overtake fintech, turning it into something similar but different. For trendsetters in the financial services industry and in ecommerce, it will be very interesting to see how fintech continues to develop.