Financial Technology

 

What is Financial Technology (FinTech)? A Beginner’s Guide

FinTech (financial technology) is a catch-all term referring to software, mobile applications, and other technologies created to improve and automate traditional forms of finance for businesses and consumers alike. FinTech can include everything from straightforward mobile payment apps to complex blockchain networks housing encrypted transactions.

In this guide, we’ll discuss the various types of fintech, the skills needed to work in the field, and the job outlook for several fintech careers. We’ll also take a closer look at a few effective ways to learn key industry skills, such as an immersive online fintech bootcamp — a great way for aspiring fintech professionals to get hands-on experience.

FinTech 101: Understanding the Basics

A Simple Definition of FinTech

The term “fintech company” describes any business that uses technology to modify, enhance, or automate financial services for businesses or consumers. Some examples include mobile banking, peer-to-peer payment services (e.g., Venmo, CashApp), automated portfolio managers (e.g., Wealthfront, Betterment), or trading platforms such as Robinhood. It can also apply to the development and trading of cryptocurrencies (e.g., Bitcoin, Dogecoin, Ether).

A Brief History of FinTech

While fintech seems like a recent series of technological breakthroughs, the basic concept has existed for some time. Early credit cards in the 1950s generally represent the first fintech products available to the public, in that they eliminated the need for consumers to carry physical currency in their day-to-day lives. From there, fintech evolved to include bank mainframes and online stock trading services. In 1998, PayPal was founded, representing one of the first fintech companies to operate primarily on the internet — a breakthrough that has been further revolutionized by mobile technology, social media, and data encryption. This fintech revolution has led to the mobile payment apps, blockchain networks, and social media-housed payment options we regularly use today.

How Does FinTech Work?

While fintech is a multifaceted concept, it’s possible to gain a strong understanding. FinTech simplifies financial transactions for consumers or businesses, making them more accessible and generally more affordable. It can also apply to companies and services utilizing AI, big data, and encrypted blockchain technology to facilitate highly secure transactions amongst an internal network.

Broadly speaking, fintech strives to streamline the transaction process, eliminating potentially unnecessary steps for all involved parties. For example, a mobile service like Venmo or CashApp allows you to pay other people at any time of day, sending funds directly to their desired bank account. However, if you paid instead with cash or a check, the recipient would have to make a trip to the bank to deposit the money.

FinTech Trends

Over the years, fintech has grown and changed in response to developments within the wider technology sector. In 2022, this growth was defined by several prevailing trends:

• Digital banking continues to grow: Digital banking is easier to access than ever before. Many consumers already manage their money, request and pay loans, and purchase insurance through digital-first banks. This simplicity and convenience will likely drive additional growth in this sector, with the global digital banking platform market expected to grow at a compound annual growth rate (CAGR) of 11.5 percent by 2026.
• Blockchain: Blockchain technology allows for decentralized transactions without a government entity or other third-party organization being involved. Blockchain technology and applications have been growing quickly for years, and this trend is likely to continue as more industries turn to advanced data encryption. Check out our guide to blockchain technology if you’re interested in learning more.