Technology has transformed the way we do exactly about everything from
shopping to socializing and itï¿½s also turning the financial services industry on
its head. Over the previous couple of years, a crop of Fin-tech start-ups has
emerged, using technology to make it easier for people to wish for an edge, make
payments, and even get a loan.
For millennials, itï¿½s particularly appealing because they grew up with mobile
devices and wish to conduct financial transactions the same way they could share
pictures or apply for employment. The technology companies recognize that and
have capitalized thereon. [Millennial] see financial services as a consumer
product which can be how different way of watching it,
says James Westar,
director of research at IDC, the market research firm.
But itï¿½s not only their fresh perspective on financial markets that are making
this industry possible. Itï¿½s also a convergence of technology and large data,
enabling all types of companies to harness and analyze information in new ways,
whether itï¿½s arising with a customized investment plan or approving a loan
through a special underwriting process.If you would like term life insurance,
thatï¿½s a simple transaction.
But once you get to complex financial products, it gets dangerous because there
are numerous nuances, explains Williams. When Fin-tech emerged within the 21st
Century, the term was initially applied to the technology employed at the
back-end systems of established financial institutions. Since then, however,
there has been a shift to more consumer-oriented services and thus a more
Fin-tech now includes different sectors and industries like education, retail
banking, fundraising and non-profit, and investment management to call a few of.
Fin-tech also includes developing and using crypto-currencies like bitcoin.
While that segment of Fin-tech may even see the foremost headlines, the large
money still lies within the normal global banking industry and its
multi-trillion-dollar market capitalization.
Sort of the foremost active areas of Fin-tech innovation include or revolve
around the following areas:
- Fin-tech refers to the blending of technology into offerings by
financial services companies to strengthen their use and delivery to
- It primarily works by unbundling offerings by such firms and creating
new markets for them. Start-ups disrupt incumbents within the finance
industry by expanding financial inclusion and using technology to cut down
on operational costs.
- Fin-tech funding is on the rise but regulatory problems abound. New
technologies, like machine learning/artificial intelligence, predictive
behavioral analytics, and data-driven marketing, will take the guesswork and
habit out of monetary decisions. "Learning" apps won't only learn the habits
of users, often hidden to themselves, but will engage users in learning
games to make their automatic, unconscious spending and saving decisions
better. Fin-tech is additionally a keen adaptor of automated customer
service technology, utilizing chatbots and AI interfaces to assist customers
with basic tasks and also keep down staffing costs. Fin-tech is additionally
being leveraged to fight fraud by leveraging information about payment
history to flag transactions that are outside the norm.
- Cryptocurrency and digital cash
- Blockchain technology, including Ethereum, a distributed ledger
technology (DLT) that maintains records on a network of computers, but has
no central ledger.
- Smart contracts, which utilize computer programs (often utilizing the
blockchain) to automatically execute contracts between buyers and sellers.
- Open banking, a thought that leans on the blockchain and posits that
third parties should have access to bank data to make applications that make
a connected network of monetary institutions and third-party providers. An
example is that the all-in-one money management tool Mint.
- Ensure-tech seeks to use technology to simplify and streamline the
- Reg-tech, which seeks to help financial service firms to satisfy
industry compliance rules, especially those covering Anti-Money Laundering
and Know Your Customer protocols which fight fraud
- Robo-advisors, like Betterment, utilize algorithms to automate
investment advice to lower its cost and increase accessibility.
- Unbanked/underbanked, services that seek to serve disadvantaged or
low-income individuals who are ignored or underserved by traditional banks
or mainstream financial services companies.
- Cybersecurity, given the proliferation of cybercrime and thus the
decentralized storage of data, cybersecurity, and Fin-tech are intertwined.
The concerns of FinTech regulators have focused on investment fraud, securities
of cryptocurrencies, systemic risk regulation, and financial organization
functions and concealment, and taxation. Regulators are concerned about the
likelihood of AI (AI) making money through deception. Just accepting laws isn't
enough to manage FinTech. Regulators will get to be much more proactive now than
ever before. New technologies help new players perform activities traditionally
run only by institutions that are strictly controlled.
Therefore, arrangements should be made to prevent migrating commercial
activities from migrating between businesses seeking mild regulatory control.
Regulators' Response to FinTech There are several financial ecosystems within
the world, all with varying degrees of complexity and regulatory frameworks.
Given this diversity, there will be no one-size-fits-all approach that can add
every country or satisfy all stakeholders in each state. Different regulatory
agencies can also have different mentalities when it involves innovation, and
these mentalities will play an enormous role in how they react to FinTech. Many
regulatory agencies will remain a neighborhood of technology and life. If
consumers use financial services in new and innovative ways, it's up to them to
manage and adapt to those new technologies.
FinTech companies, currently operating with little or no capital, are vulnerable
to severe regulatory risks which can drive them down and make large institutions
dependent. Accurate estimation of the FinTech regulatory environment goes to be
vital for both practitioners and investors regarding marketing, data protection,
capital requirements, and many other regulations. Therefore, FinTech regulations
are of great importance, and changes are expected within the approaching years.
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