FinTech is not a product or an app rather a portmanteau of financial technology that has made online transactions and operations more effective and automatic. Over the years, FinTech has gained popularity because it complies with Anti-money Laundering (AML) and Know Your Customer (KYC).
Financial threats are on the rise and therefore, it is paramount for banks and financial institutions to come to grips with it. Companies need more transparent and robust fraud detection plans not to let the confidential information snitched. However, financial sector is still a bit reluctant to adapt to avant-garde technology.
One of the significant reasons for not embracing FinTech is it is expensive and requires training. Most of the banks and financial institutions are still using outdated and manual methods. Traditional procedures are long and not as effective as latest methods.
FinTech solutions are known as digital solutions that ensure prevention from fraud and illegal activities. We are living in the digital world where majority of transactions are done online whether it is feeding personal information, sending confidential emails, transferring money from one account to other.
Cutting-edge solutions detect fraud immediately and advance the accuracy and efficiency. However, the main purpose of using FinTech in the financial industry is to detect KYC and AML check. Financial institutions can use FinTech solutions to check relevant status of clients.
FinTech has changed the behaviour of customers in the Finance industry
Since FinTech has smeared across the financial industry, online culture has drastically changed. Smartphones have made possible for all service providers to deal with customers with more ease. People do not have to go anywhere. They can access all information with one click. Whether it is checking the balance of a bank account or booking a ticket for the theatre, all tasks are done online.
In fact, people can take out a loan online now. Whereas banks follow traditional and tedious procedures to approve a loan application, direct lenders with online facility assist the borrowers. You do not need to visit the lender in person and stand in long queues for your turn. Instead, you will visit the website of your lender to fill an application form and submit. From verifying your personal information to disbursal of funds, the entire procedure is done online.
Advantages of FinTech for Online Lending
You do not need to waste your time in paperwork. Loans are approved the same day when you apply and the next day if you put in an application on a holiday.
FinTech platforms are benign for lenders as well. Whereas traditionally lenders would take several days to sign off on applications, they can screen myriad of applications within a couple of minutes with FinTech advanced algorithms.
Since finance met technology, the birth of several online lenders happened, and now it is giving a wide choice to borrowers. Now people can compare deals of each lender with the others and choose the best on the basis of their affordability.
Every coin has two aspects, similarly FinTech is also equipped with certain drawbacks. Even though the concept uses advanced algorithms, lenders may lose database due to virus attack and another technological glitch.
FinTech Funding is Reaching New Heights
According to FinTech Global, the third quarter of the last year saw the largest number of deals. The size of deals kept increasing as compared to 2017. The value of FinTech investment in the UK in 2018 went up to $2.8 billion. It was more than double of the investment done in 2016.
There had been seven investments from deals over $100 billion last year and the largest investment was $250 billion. Total two transactions were made by such a huge amount. Revolut raised the first and the other one was Greensill Capital, a digital supply chain finance company.
According to FinTech Global, FinTech deal sizes have continued to grow. Take a look at the following table.
|Year||Total number of deals (%)|
The bottom line
FinTech is growing. Every business uses online platforms to deal with customers. Whether it is the financial industry or e-commerce, the use of FinTech will keep increasing. According to the data, it is expected that this year FinTech deals will outperform 2018.