Fintech 101

By Sarang Madhani on The CapitalWhat is fintech?The name, simply, is an amalgamation of the words ‘Finance’ and ‘Technology.’ Fintech is a ‘support system’ for the finance industry. The most rudimentary and early use of fintech was assisting in bookkeeping among other back office work.EY’s report on “Global FinTech Adoption Index 2019” defines fintech as “organizations that combine innovative business models and technology to enable, enhance and disrupt financial services.” Fintech has evolved over the years and made itself to the forefront of the finance industry resulting in more interaction with customers and individuals not exclusively in the finance industry.Where have we seen it?With the majority of our transactions carried out online chances are that we’ve all used either Paytm, M-Pesa, PayPal, MeaWallet, or some other mobile payment app. All these companies come under the umbrella of fintech.These companies by-pass traditional payment methods such as cash, checks, etc. and offer a more efficient form of the transaction. Additionally, with the mobile-internet boom, access to these apps have been easier now more than ever before.This ease of adoption fuels the disruptiveness of these companies.Businesswire reported that the mobile payment industry would reach USD 307 Billion by 2025, attributing this success to the ability of the mobile payment industry to reach the “unbanked” or “underbanked” communities. On similar lines, but less exposed to the general public, companies such as LendingKart, Capital Float, and LoanTap extend credit to those that the traditional banks have largely failed to serve.This is not to say traditional banks have not tried to keep up. Traditional banks such as Citigroup and Bank of America have tried to throw their weight and money behind mobile payment and lending apps. However, they are top-heavy and their decision-making processes are not as nimble as some of the start-ups of today.New areas of FintechCryptocurrencies and Blockchain technology are one of the latest applications of fintech. However, the acceptance and use of cryptocurrencies have been highly controversial. Cryptocurrency exchanges such as Zebpay have received flak from various governments in the form of tax raids, heavy monitoring of their bank accounts, and at one point a blanket ban. The degree of disruption and excitement surrounding it was nothing short of euphoric followed by a massive sugar-rush-crash.The less controversial applications have been chatbots on Whatsapp and websites for customer services; stock trading apps; point-of-sale terminals; insurance aggregator apps; and fraud detection apps.A final note on FintechAs we defined fintech as ‘disruptive’ and have seen the controversial side of it, we can continue to expect more regulation and a spike in Fintech fraud.Regulation and government reaction shouldn’t be taken negatively as this industry is going to continue to grow at a lightning pace. Therefore some amount of skepticism from regulators and consumers alike is expected.The finance industry is exposed to a tremendous amount of fraud. As consumers, our best move is to stay abreast of the new trends in fintech so that we are protected from frauds and don’t get left behind in this fintech revolution.I intend to write more on fintech and fraud, so see you at the next one. 101 was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Author: Sarang Madhani