What is fintech?

1 min readLast updated October 5, 2023by Rachel Carey

Financial technology, or fintech, is changing how businesses and people use and interact with money. From handy apps that help people budget to blockchain technology that allows for faster cross-border payments to preventing fraud and identity theft, fintech has quickly become vital for many financial institutions. But what exactly is fintech, and why are some businesses described as fintech firms? Let’s take a closer look.

What is fintech? 

Fintech is the combination of technology and finance. It’s used by businesses to operate faster or complete manual tasks more efficiently, and people can use it to budget, invest and manage their savings.  

Traditionally, banking and finance sectors have slowly integrated technology into their operations. However, as major life decisions, such as applying for mortgages, are often personal and complicated, using technology risks overlooking the confidential nature of the sector. 

But things are changing, and from challenger banks to established institutions, fintech is becoming an important staple for people and organizations. From robo-advisors to entirely digital banks, fintech is already at the heart of smart financial services and solutions. 

What are fintech companies? 

Fintech companies significantly or entirely base their key operations around technology. For example, some of the most popular fintech companies over the last decade have been digital banks, such as Axos, Revolut, Varo, and Ally Bank. These banks operate largely or mostly digitally, allowing users to access and interact with their money in real time through an app. 

Other notable fintech companies include payment gateway companies, like Visa and Klarna, and investing platforms, like Robinhood, which help people invest in products like stocks and shares. While these are only a selection of firms that have built a reputation as a fintech company, many larger and more established banks and financial companies are starting to use fintech to grow their operations. Whether start-ups or established businesses, fintech is powering various companies.  

Why is fintech important? 

Technology is important for the financial industry for much the same reason technology is important to a wide range of sectors and can benefit both businesses and consumers. On the one hand, technology can help businesses reduce their costs, allowing them to offer better prices for customers. For example, by operating largely or completely virtually, digital banks can save money on overheads, allowing them to offer better interest rates on their accounts instead.  

Evolutions in fintech are also helping to keep many people safe from fraud. While there is no way to keep everyone’s money safe 100 percent of the time, the increasing use of data, automated transaction screening, and AI provides an extra layer of prevention and detection that keeps people safe. So, from customer safety to financial perks, fintech’s innovations are important for many reasons. 

How does fintech impact me? 

1.Sending money 

Seamlessly transferring money between accounts is something many people today take for granted. However, this kind of technology has only shot to prominence in the last decade, before which transferring, sending, and depositing money was much more cumbersome.  

Today, almost all banks allow you to send money to another account rapidly through a mobile app. Some even allow you to send money internationally with minimal restrictions and challenges—with new businesses and platforms pushing the boundaries of international money transfers daily.  

2.Saving and investing 

In the same way that sending and depositing money involved physical trips to a bank branch, fintech now makes saving and investing your money for the future easier. Many digital bank apps let you divide your savings into pots, helping you visualize how much you are saving towards your goals and making it easier to budget.

Now, a wide range of platforms allow people to invest their money quickly and easily. For example, firms like Robinhood and Fidelity offer digitally enhanced ways of quickly investing your money in trusts and financial products. While fees usually apply, they offer much greater ease of access when investing your money.  

Some investment platforms also include robo-advisors with their services. These intelligent tools use AI, data, and user inputs to help break down investment options for users and can help bridge the gap between experienced investors and new ones.  

3.Credit checks 

From gathering the right documents to making digital copies, submitting them, and then waiting to hear back, getting a credit check done used to take a long time. While some still do, many fintech firms and apps have significantly sped up the process for getting a credit check – helping more people secure mortgages and loans that bit faster.  

4.Finding and comparing policies 

Fintech also makes comparing policies and products easier and quicker. Many insurance companies offer their own comparison tools, but there is also a growing range of third-party apps and platforms that let consumers compare at will.  

How is fintech evolving? 

Fintech has changed how many businesses operate in only a short period of time, and the space continues to develop at pace. Many investing platforms and apps increasingly allow users to invest in alternative assets, notably cryptocurrency. Although investing in alternative assets does come with risks, they have become increasingly popular in recent years as, thanks to platforms and apps, they have become more accessible to the wider public.  

Elsewhere, blockchain is widely seen as one of the most promising technologies for fintech firms. Blockchain is a decentralized ledger of cryptocurrency transactions shared across a peer-to-peer network. It cannot be altered or changed and is an extremely secure way of storing information. This technology can be used to store customer information and identities securely, helping to resolve identity theft much faster than current methods, and has the potential to revolutionize the international payments system with reduced transaction costs and faster cross-border transactions.  

The blockchain is already being used across a small number of fintech firms. Still, it is quickly evolving into a critical technology in the sector and will continue to be an important technology in the future.  

Fintech is helping businesses and people manage and interact with their money more quickly and easily than ever before. From sending money across borders to preventing identity theft and fraud, fintech can help you properly manage and use your money. But it could be time to speak to a financial advisor if you’re looking to save for your future and reach your financial goals. Find your next advisor on Unbiased.

Senior Content Writer

Rachel Carey

Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.