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

The phrase “financial technology,” or “fintech,” refers to a broad category of software, mobile applications, and other technologies designed to enhance and automate conventional financial services for both consumers and enterprises. FinTech encompasses a wide range of technologies, from simple mobile payment applications to intricate blockchain networks that store encrypted transactions.

The many forms of fintech, the qualifications required to operate in the industry, and the employment prospects for various fintech positions will all be covered in this book. We’ll also look more closely at some efficient methods for picking up essential skills for the field, like an immersive online fintech boot camp that’s a terrific way for ambitious fintech workers to gain practical experience.

Understanding the Basics

Understanding the Basics
Understanding the Basics

A Simple Definition of FinTech

Any firm that employs technology to improve, automate, or change financial services for customers or enterprises is referred to as a “fintech company.” Peer-to-peer payment services (like Venmo and CashApp), automated portfolio managers (like Wealthfront and Betterment), mobile banking, and trading platforms like Robinhood are a few examples. It is also applicable to the creation and exchange of digital currencies, such as Ether, Dogecoin, and Bitcoin.

A Brief History of FinTech

Although fintech appears to be a relatively new wave of technical innovations, the fundamental idea has been around for a while. Due to its ability to do away with the necessity for users to carry actual cash daily, early credit cards from the 1950s are typically seen as the first financial products made accessible to the general public.

Subsequently, fintech expanded to encompass online stock trading services and bank mainframes. One of the first fintech businesses to operate exclusively online was PayPal, which was established in 1998. This innovation has now been further transformed by social media, mobile technology, and data encryption. The fintech revolution has resulted in the widespread adoption of mobile payment applications, blockchain networks, and social media-based payment choices.

How Does FinTech Work?

Even if fintech is a complex idea, solid knowledge may be attained. FinTech makes financial transactions easier for organisations and customers to do, increasing accessibility and typically lowering costs. It can also apply to businesses and services that use big data, encrypted blockchain, and artificial intelligence (AI) to enable extremely safe internal network transactions.

Fintech, in general, aims to simplify transactions by removing stages that could be superfluous for all parties involved. You may transfer money to someone at any time of day using a mobile app like CashApp or Venmo, for instance, and it will go straight into their bank account. The recipient would have to go to the bank to deposit the funds if you paid with cash or a cheque instead.

FinTech Trends

Fintech has evolved and expanded throughout time in reaction to advancements in the larger technology industry. This expansion in 2022 was characterised by many dominant trends:

  • Digital banking continues to grow: Accessing digital banking is now simpler than ever. Numerous customers now use digital-first banks to handle their finances, apply for and repay loans, and buy insurance. This industry is predicted to develop further because of its simplicity and ease; by 2026, the worldwide market for digital banking platforms is projected to expand at a compound annual growth rate (CAGR) of 11.5 per cent.
  • Blockchain: Decentralised transactions with no involvement from a government agency or other third-party organisation are made possible by blockchain technology. For years, blockchain applications and technology have been expanding swiftly, and as more businesses adopt sophisticated data encryption, this trend is probably going to continue. If you want to understand more about blockchain technology, have a look at our guide.
  • Artificial Intelligence (AI) and Machine Learning (ML): Fintech organisations’ scalability has been disrupted by AI and ML technologies, which have redefined the services they provide to customers. AI and ML can detect fraud, save operating expenses, and improve the value offered to clients. Anticipate these technologies to play a bigger and bigger part in fintech’s ongoing growth as they become more accessible and inexpensive, especially as more physical banks transition to digital platforms.

The Technologies That Power FinTech

The Technologies That Power FinTech
The Technologies That Power FinTech

Blockchain, AI, and big data are the main forces behind modern finance, and they have all fundamentally changed how businesses move, store, and safeguard digital cash. In particular, companies may gain significant insights into consumer behaviour and spending patterns via AI, which will help them comprehend their clientele.

Big data analytics may assist businesses in forecasting market shifts and developing fresh, data-driven business plans. Blockchain is a more recent financial technology that facilitates decentralised transactions without the need for input from a third party. Potential additions or modifications to encrypted data may be monitored by a network of blockchain participants.

How Safe is FinTech?

Customers usually have faith in fintech businesses; as Forbes reports, 68% of customers are eager to utilise financial instruments created by non-traditional (i.e., non-banking, non-finance) organisations.

But since many fintech apps are still in their infancy, they aren’t currently bound by the same safety laws that apply to banks. This only indicates that exercising caution can be advantageous; it doesn’t imply that customers shouldn’t trust fintech businesses with their money. For the majority of customers, there are more advantages to dealing with a fintech business than disadvantages.

Different Types of FinTech

FinTech has transformed financial institutions for millions of people worldwide, altering how we exchange money, purchase stocks and other financial products, and obtain financial guidance. Fintech businesses come in a wide variety and offer distinctive services to their customers. Here are a few well-known instances:

Robinhood (Stock Trading)

One of the numerous applications that make digital stock trading easier is called Robinhood; it reduces the conventional broker-client relationship to a simple online exchange. The creators of Robinhood saw that other investing platforms paid exorbitant fees to their users, although making transactions doesn’t cost anything.

In response, the business introduced its fee-free trading platform, which gives smartphone users greater freedom to buy stocks. In addition to commission-free stock and exchange-traded fund trading, the platform also allows users to trade cryptocurrencies.

Venmo (P2P Payments)

One well-known example of a peer-to-peer (P2P) payment resource is Venmo, which enables speedy transactions through direct digital file sharing. People may easily start free transactions with friends and family or pay modest fees to businesses with the help of companies like Venmo.

The business is most notable for framing its transactions through a social feed that enables sharing and displaying of payments with a buddy list. Through social media and smart devices, services like Venmo have profited from a culture that is becoming less and less dependent on currency.

Klarna (E-Commerce)

A fintech business called Klarna offers payment solutions for online shopping and other activities that involve digital transactions in general. In particular, Klarna offers instalment plans, pay-after-delivery choices, direct payments, and payments for online stores.

Customers can use this licenced bank to make purchases using the “buy now, pay later” strategy. They can also choose low-cost or interest-bearing payment plans for their purchases. This kind of transaction splitting enables customers to pay for a product gradually rather than all at once.

Wealthfront (Wealth Management)

Wealthfront is a fintech robo-advisor or platform that assists customers by investing their money for them automatically and giving them financial advice according to their objectives. Without the assistance of a financial counsellor, robo-advisors create investment portfolios using computer algorithms and specialised software.

Based on the requirements, objectives, and market circumstances of the user, the programme automatically makes investments and rebalances them. Specifically, Wealthfront provides daily tax-loss harvesting, automatic rebalancing, and other automated investing-based services that can help clients by simplifying the management of their investments without the need for manual participation.

Square (Business Payments)

Businesses may accept credit cards on a smartphone, tablet, or terminal by using Square, a point of sale and payment service. Before the establishment of organisations such as Square, expensive costs and complicated technology occasionally made it difficult for small businesses to accept credit cards. Businesses may collect payments, generate receipts, and deliver virtual gift cards to their clients with Square’s user-friendly approach.

How to Learn FinTech (and the Five Skills You Need)

How to Learn FinTech (and the Five Skills You Need)
How to Learn FinTech (and the Five Skills You Need)

For individuals with the necessary experience, the expanding sector of fintech offers a wide range of professional prospects. Do you want to work in finance as a career? Here are a few courses that cover important industry foundations and provide you with numerous essential skills to practise right now.

Educational Pathways in FinTech

Educational Pathways in FinTech
Educational Pathways in FinTech

FinTech Boot Camps

FinTech boot camps offer a platform for students to rapidly begin their fintech careers. Students interested in the subject can get hands-on experience and organised learning opportunities through boot camps. Boot camps offer a comprehensive curriculum that mimics real-world experiences, but they can also be pursued remotely in a way that works with your schedule.

They are both rigorous and personalised. For instance, in just 24 weeks, Columbia Engineering FinTech Boot Camp provides a foundation for anybody looking to get started in fintech. Its adaptable courses cover everything from algorithmic trading and blockchain transactions to financial analysis.

Degrees With a Focus on FinTech

As the fintech industry expands, more universities are starting to offer standard degrees with a fintech concentration. Through these programmes, students may get technological abilities that could be useful in fintech while still learning the intricacies of a traditional finance major. Depending on the degree programme and the maximum number of classes a student can enrol in at once, these programmes often take 2-4 years to finish.

Self-Taught FinTech Options

For those who choose to study fintech independently, there are a plethora of tools at their disposal as well, such as digital manuals, instructional multimedia and applications, and free online courses. Self-teaching choices provide an opportunity to acquire industry fundamentals as well as personal organisation and time management skills, making them perfect for those who want a completely independent learning framework.

Key FinTech Skills

Key FinTech Skills
Key FinTech Skills

Programming

The great majority of fintech companies leverage websites or mobile applications to extend their reach and boost customer value. These financial websites and apps are mostly created and maintained by programmers and software developers, who also design them to be user-friendly, efficient, and safe. Programming languages used often in finance include Python, C++, Ruby, and Java.

Cybersecurity

The majority of contemporary fintech businesses are data-driven and frequently linked to enormous digital networks that offer consumers new opportunities and experiences. Although there are many benefits to this structure, there is also a chance that security lapses and cyberattacks may occur. As a result, prospective fintech workers can gain by having a functional understanding of cybersecurity and learn how it shields fintech businesses from online criminals and other dangers.

AI/ML and Data Science

A significant amount of data is generated by today’s fintech consumers, and a large number of fintech businesses utilise this data to customise their offerings and provide extra value. Big data may be used to forecast financial outcomes depending on the actions of customers, managing their money and providing important insights that help them make better, more educated decisions. Because of this, aspirational fintech workers should aim to have a foundational grasp of data analysis, since it will probably be useful in their future careers.

In particular, businesses frequently utilise machine learning (ML) and artificial intelligence (AI) algorithms to process and analyse vast volumes of data, producing insights that may be put to use. AI/ML algorithms are a vital data-oriented talent for anybody wishing to work in the fintech industry since they can reduce risk, boost profits, automate procedures, and make future predictions.

Block Chain

The need for blockchain savvy has increased in tandem with the continued rise of Bitcoin as a significant financial industry. Aspiring fintech workers benefit from having a basic understanding of the underlying cryptography and design of blockchain technology, as well as the range of applications and consequences it has for global currency lending, trading, and reconciliation. The financial industry is predicted to be disrupted by blockchain-based cryptocurrencies for years to come, so possessing this kind of skill set helps ease the transition.

FinTech Careers, Job Outlook and Salaries

FinTech Careers, Job Outlook and Salaries
FinTech Careers, Job Outlook and Salaries

There are more and more career options in the subject of fintech for individuals who are interested in it. Below is a brief synopsis of a handful of these careers:

Financial Analyst

Financial analysts assist companies in making choices that would hopefully result in higher profits down the road. They evaluate the performance of stocks, bonds, and other financial products using sophisticated critical thinking. The employment outlook for financial analysts is currently favourable. The Bureau of Labour Statistics (BLS) projects a 5% growth in the sector by 2029. In 2020, the median salary for a financial analyst was $83,660.

Information Security Analyst

For today’s fintech organisations, protecting computer systems and data from unauthorised access is crucial, and information security analysts design and implement security efforts to do just that. Information security analysts have excellent employment prospects. Information security analysts could expect a 31% increase in employment by 2029, which is substantially faster than the average for all industry jobs, according to the BLS. Information security analysts made $103,590 on average in 2020, which was much more than the national average.

Blockchain Engineers

An increasing number of fintech firms and apps are a part of the blockchain ecosystem. Decentralised blockchain applications, such as voting systems, lending apps, and cryptocurrency exchanges, are designed, developed, and maintained by blockchain technologists. The typical pay for a blockchain engineer was $92,870 in 2020, according to CareerOnestop, and the industry is predicted to add 6,000 new positions by 2029.

FAQs About Fintech Financial Technology

Which competencies are required for fintech?

Fintech offers a wide range of occupations, many of which are based on programming, blockchain, AI/ML, cybersecurity, and data analysis capabilities. Completing an online fintech boot camp is an excellent place to start if you want to acquire these abilities for a new job.

Is PayPal a fintech company?

Indeed, PayPal is a fintech business. In actuality, PayPal was among the earliest businesses in the fintech industry and is among the biggest in the world. The multinational behemoth has altered the way a great number of us do business online.

What distinguishes banks from fintech companies?

Banks and fintechs offer distinct services to their customers. Conventional banks are organisations that often include both physical sites and online businesses. They are authorised to take deposits from clients and utilise those funds to finance loans.

Conversely, FinTech encompasses any technologies designed to simplify and enable online transactions. Numerous companies have embraced fintech to enhance their financial services and, frequently, increase product accessibility. Fintech businesses often deposit their clients’ money in a bank account while offering extra services and value.

Will banks be replaced by FinTech?

Whether fintech resources will eventually totally replace traditional brick-and-mortar banks is still up in the air. If they did, they would probably have to alter their operations and be bound by the same laws as already existing banks.

To work in FinTech, is coding knowledge required?

Although coding isn’t required, there are plenty of software engineering and code-related positions in the finance industry. A person’s options for fintech jobs are increased when they possess a thorough understanding of coding.

Leave a Comment