Your Definitive Guide to Understanding the Fintech Industry
Startups nowadays make our lives easier through ingenious technologies. Among the sectors that are becoming a familiar term is the fintech industry.
The fintech industry is a thriving ecosystem of financial innovation. Several startups integrate cutting-edge technology such as artificial intelligence to provide a better, more efficient handling of our finances.
If you haven't heard about the fintech industry, let's get into what the industry is doing for the financial market.
What Do You Mean by the Fintech Industry?
The term "fintech" combines two words - finance and technology. This portmanteau of finance and tech aims to solve complex problems in the way people handle their finances. Fintech companies develop technology platforms for the financial sector.
- 10,605 in the Americas
- 9,311 in Europe, Middle East, and Africa
- 6,129 in the Asia Pacific region
With more industry players, the fintech industry is becoming a vibrant sector. Each fintech startup works hard to develop a tool that people and companies will prefer to use.
Technology-led companies can consider entering the fintech industry. While it has a higher barrier to entry due to its complex nature, there are still a lot of challenges where companies can develop innovative solutions.
The fintech industry has several types of users and applications. Wage-earners want a better way to save their salary. Consumers buying an item want a more efficient payment method. Meanwhile, large conglomerates require a secure financial system. These are just some of the pressing issues that the fintech industry wants to solve.
Unlike other startups, the fintech industry is a bit more complicated. You'll be handling the money of people or a business.
Financial transactions are complex, with the keen attention to secure transactions and ensuring that end-users can manage their finances smoothly.
In the fintech industry, you can't just code an app and offer it to users. There are regulations you have to follow, and this varies across various regions around the world. If you're thinking of getting a slice of the lucrative fintech industry, identify its specific sectors. This way, it will be easier for you to narrow down which fintech market you'll be serving.
What Are the Fintech Sectors?
Startups engaged in the fintech industry solve problems in managing financial instruments. The common sectors that fintech covers are any of the following:
Paying online is now commonplace with the increasing use of apps and digital payment systems. Payment fintech companies sprout up due to the rising eCommerce boom. The fintech payments sector solves the problem of consumers who want an efficient and secure payment method.
Some examples of fintech industry platforms are:
1. Paypal - the most widely known digital payment platform with a market share of 54.48%. Covering more than half of the payment users, it's the leading fintech in the payment sector.
2. Stripe - a new contender that has reached up to 46 countries. It provides cloud-based solutions for businesses that want to revolutionize their payment methods.
3. Wise - this fintech platform allows seamless transfer of money across different currencies. Based in London, it has a peer-to-peer money transfer model.
4. Venmo - around 20% of online payment users in the U.S. use the digital wallet platform. Its parent company is PayPal and has been largely known as an app to split bill payments easily.
With digital payment, consumers have an array of options on how to pay. Fintech companies also integrate these virtual payments to brick-and-mortar stores, online shops, and websites. The process reduces the friction when it comes to paying for products and services.
Personal finance is another fintech sector that has a lot of startups developing tools for various users. Every consumer can now easily download an app to track and manage their finances. A user can accurately track their savings, manage credit scores, and many other personal finance functions.
Among the fintech platforms providing digital banking options for users are:
1. Trim - the financial software company helps a user save money automatically. It also analyzes the user's transaction and helps them negotiate on their bills.
2. Mint - this platform allows a user to access graphs and relevant information about saving, budgeting, and many functions. There's no need to download an app as this tool works well on a browser.
3. Credit Karma - credit score is a very important metric for consumers. This fintech software enables users to review and make amendments to improve their credit scores.
Personal finance technologies cater to a more B2C target market. They are responsible for developing apps that consumers use to manage their finance, an area that traditional banking is lacking.
Also called insurance tech or insurtech, this fintech sector innovates existing insurance models to a more efficient, cost-saving alternative for policyholders. These insurtech companies make it easy for companies, agents, and clients to provide custom insurance policies.
A few insurtech platforms revolutionizing this sector are as follows:
1. Lemonade - the peer-to-peer service is ranked as the number one insurance company in the U.S. by several application channels. It has a machine-learning method using AI chatbots to provide users with instant answers to their insurance inquiries.
2. FitSense - a personalized insurance quote is possible with this platform. The integration of the app and device data makes it easy to come up with a health or life insurance policy, depending on the user's physical activities.
Getting insurance quotes or comparing them is possible through these fintech companies that provide efficient platforms. This fintech sector covers just about any insurance ranging from car, home, life, and medical coverage. Users can have quotes or even subscribe right away with fintech startups targeting their insurance needs.
The fintech industry is also making it easier for individuals and businesses to create or manage wealth. Investment opportunities such as stock trading are now easily accessible. It's now even more efficient with the rise of robo-advisors, a new way to assess investments. What was previously available to stockbrokers and wealthy individuals, now everyone else can trade and analyze stocks.
Managing wealth through a digital platform is now more efficient through these fintech platform examples:
1. E-Trade - this fintech subsidiary of Morgan Stanley provides a digital platform for investors to trade stocks, options, mutual funds, and many other financial trading transactions.
2. Robinhood - the well-known fintech platform started by providing commission-free trading of stocks and ETFs. After which, they now have a wide array of services, including cryptocurrency trading.
3. SoFi - this robo-advisor platform automates the investing process. It works by understanding the user's investment goals and providing them with personalized ETF portfolios.
4. Bambu - relationship managers working with wealthy clients can use this platform. The white-label approach helps them create a customized and efficient portfolio management system.
Aside from stock trading, fintech is also responsible for various fund management tools. These fintech platforms make it seamless for companies and individual users to identify investment opportunities, manage their portfolios, and many other possibilities to build their wealth.
These fintech sectors have more to innovate for financial consumers and commercial entities. Fintech startups create a platform where one can send payments digitally, get insurance quotes within minutes, or for businesses to grow their finances. However, is it a preferable industry to join?
Is Fintech a Good Industry?
Depending on one's skills and expertise, fintech is a good industry for startup companies. By 2024, global fintech revenues will amount to . And there are still a lot of opportunities in solving financial transactions that technology can effectively address.
Other sectors in the tech landscape already have a lot of competition, owing to the easy entry of creating a startup. The fintech industry, on the other hand, is a bit more challenging. It's unlike social media platforms where you're just connecting people. It is also different from general SaaS geared towards the specific needs of a business.
Fintech startups who want to make it to the industry can start identifying problems people face regarding their finances. From there, a company can create a robust technology that will help the users.
Aside from coming up with an efficient financial tool, you will also need to consider how to market your product. Typically, a fintech platform has a new product that people haven't tried yet. You will need to educate them on what your fintech tool does and how to use it. To do this, you'll need the following:
- Graphic design
- Video or animations
- Well-written content
Subscription services like Delesign can help you in these aspects. The on-demand firm has a complete suite of services to choose from - graphics, video editing, and SEO writing. When you subscribe, it'll be easier for your customers to understand your fintech platform.