The rise of fintech in recent years has truly been something spectacular to behold. The EY 2019 fintech report showed that worldwide adoption of fintech jumped from 16% in 2015 to 64% in 2019. What’s equally remarkable is how the public at large has joined the revolution. A survey of 27,000 consumers showed that 96% were aware of what fintech is and that about 75% of them are already using some form of fintech.
Granted, many people probably don’t know they’re using fintech, per se. The term is broad. It stands for “financial technology,” and that can include even technology that originated decades ago, such as an ATM machine or a simple online bank account.
However, leading-edge fintech means all kinds of payment apps, trading apps, cryptocurrencies, online-platform financial instruments, government-developed tax collection systems – and don’t forget crowdfunding! All said, there are key factors driving the growth of fintech today.
The first is that fintech is a force for equalization and the democratizing of finance. For example, a poor woman in Mexico who can get her hands on a smartphone can leverage a free app to start a crowdfunding campaign to raise money for a new business.
Another example: An unemployed Gen Zer can download a trading app and start buying and selling stocks. There’s no longer a need to use a broker, pay hefty broker fees or put up a chunk of equity to obtain a line of credit.
Second, banks have long since ceased to care much about “the little guy.” They focus most of their investment opportunities on the commercial sector and big corporations. Banks aren’t making much effort to give some ordinary guy a small business loan to start up a street corner food truck.
Fintech is providing opportunities for the masses to leverage creative ways to raise capital to fund their dreams.
Third, fintech tends to focus on just a single product or service sharply. A fintech system can focus on the needs of the customer without the business owner being required to tap into a cumbersome legacy system of banking, finance, or whatever. Transactions can be handled with simple apps that make interactions between seller and buyer an absolute snap.
Fourth, fintech is better able to leverage powerful tools, such as AI, machine learning, easy-to-use accounting software –- and so much more.