6 popular types of Fintech and how they work

When people hear the phrase “Fintech” they automatically think it’s something related to some next-level activity done by tech gurus but they are wrong.

We carry out activities related to Fintech industries every day, for example, transferring money to someone and online shopping is a basic activity we do every day that is a big part of the Fintech industry.

Even when cryptocurrency seems to be the face of Fintech industries nowadays. The real money in the Fintech industry is gotten from the banking sector.

Before we get into the 6 popular types of fintech and how they work let us pin down a definition for Fintech.

Fintech is the combination of two words, Finance, and technology, it simply means the merging of financial services and technology to provide a better service to customers.

Fintech is here to unburden us of the long and tiring procedures in traditional financial institutions and give us solutions to reoccurring problems.

It has pushed the banking sectors to rebrand and provide better services to their customers. People prefer procedures that are quick and easy that is why the Fintech industry is in such high-demand.

Why do you need to stand in long senseless queues when you can carry out your transactions from the comfort of your home through a mobile app or web browser.

Now the big question is how does fintech work?

Fintech can work efficiently because of these three independent factors;

Financial APIs; they are used as a form of communication between third parties and online banking systems.

Do you remember how you had to fill in your personal information every time you opened a new bank account, well it’s the same thing here because after you’ve filled in your personal information this information will automatically be provided every time you need to create a new account or carry out a transaction without you having to go through the process again.

Fintech also offers a strong security system that does not easily allow fraudulent activities. Which allows their users to trust them with their personal information and this also allows them to form a strong relationship with their customers.

Mobile Applications; Most of the Fintech industries offer their customers mobile applications so they can access their finances easily. Whether you need to buy stocks or perform a crypto transaction you can just do it from your mobile device.

Web-based solutions; Other Fintech companies would rather offer their customers a web browser version for their services so their customers can log in anytime and perform their transactions with so much ease.

6 popular types of Fintech

Lending; Gone are the days when you had to go through long and dehumanizing processes to get to the point where you would be turned down because you didn’t meet the requirements or you didn’t have collateral to get a loan.

Now because of the rise of Fintech companies, you can easily get loans to fund your education and get capital for your start-up business just by downloading the fintech app and filling out the application and you can get your loan within hours.

The fintech lending industry has many categories like; peer-to-peer lending, mortgages, cash advances, credit card builders, business loans, cash consolidation, investment loans, and so on.

All of these can be done from your mobile device with fintech apps likes; Upstart, Prosper, SoFi, Funding Circle, Brigit, MoneyLion, and Lending club.

Payments; Fintech offers business owners a platform where they can carry out all their business transactions without having to leave the platform.

These fintech companies integrate all your important applications into one space so you can carry out your activities efficiently. You can showcase your products, interact with customers and receive payments all in one space.

Now so many business owners can carry out business transactions with people locally and internationally without having to travel or go to the bank.

Now a lot of people work remotely and the only way they can get paid for their services are through FinTech companies.

Examples of these Fintech payment companies are; Apple pay, Venmo, Stripe, Alipay, Fund through, Paypal and so on.

Personal Financial Management; There are a lot of Fintech companies that help users manage their assets through the use of their software. This software allows users to have access to their financial assets from one platform.

The Fintech software lets you see your financial history so you can know how you’ve made your expenditures and it will enable you curb unnecessary expenses which will in turn assist you to make better financial decisions in the future.

A lot of people are constantly struggling with their finances and it just seems like the money they are making isn’t enough to take care of their needs. This is where personal financial management software comes into play.

Imagine having an app that can help you make budgets based on your income, an app that will provide you with a clear spreadsheet of all your expenditures. This will cause a huge turnaround in your finances and let you make investments your future self will thank you for.

Here are a few examples of some apps for personal financial management;

Dave, Brigit, Astra, Honeydue, Moneydance, Spendee, Bill tracker, and Budget planner the list is endless.

Embedded Finance; this is when Fintech companies integrate financial services into non-financial services.

It’s simply when a customer gets to use a financial service from a non-financial product.

For example, your supermarket can offer you its very own branded credit card or a discount card that allows you to get major discounts on your items or lets you buy on credit.

Another example is when a pizza place offers you a one-click payment so every time you had to order pizza you wouldn’t have to input your personal information because it would already be in the system and the best part about these services is that it is safe and optional.

Embedded finances have different categories like; Embedded banking, embedded payments, branded credit cards, embedded insurance, and embedded lending.

Wealth Management; Fintech companies have been able to push wealth management institutions to upgrade their former procedures to a more digitized form that will serve their customers better and give them a positive experience. This push has benefited wealth management institutions and some of these benefits are;

Now that wealth-management companies have decided to merge with fintech industries to provide a better service for their customers, it can enable them to use their customer's KYC to have a better insight into what the customer's needs are.

Fintech companies have helped wealth management institutions to also adopt the era of mobile apps where you can easily assess your financial history without leaving your house.

So now all the customers have to do is check their dashboard to be updated on changes and you can also chat with a chatbot if you have questions that need answers.

Examples of wealth management apps are; credit karma, money farm, wealth front, betterment, wealth simple, acorns, and plaid

Banking; the Fintech industry has assisted the banking sector to provide better services to customers. Not only can you open a bank account from the comfort of your home but you can also make investments and control your assets all from an app.

The fintech industry has elevated the banking sector so much that the need for a physical structure is now irrelevant as it has now provided people who did not have the access to commercial bank facilities the ability to perform transactions with people all over the world.

Banking sectors can reduce bulk staffing because of the use of software to carry out certain tasks. Which leads to fewer fees and more transparency.

Examples of these Fintech industries are; chime, SoFi, varo bank, ally financial, upgrade inc, capital one, and so on.

Benefits of the Fintech industry

1. Fintech industries allow merchants to carry out transactions with people from all over the world. This activity can help bring nations together and allow people to be more inclusive in the way they do business.

It will help create long-lasting relationships with different people from all races and ethnicities and also it would increase the nation’s economy because of the currency exchange.

Start-up companies can expand their business to other regions because of increase in demand which is due to the smooth business transactions and newly formed relationships.

2. Fintech industries have helped a lot of start-up companies find their footing by providing capital to help start their business, employ workers, and even buy raw materials.

These fintech industries have given a lot of confidence and hope to people in rural areas who cannot afford to have access to large sums of capital to start their own businesses. Now all you have to do is download their mobile application or access the web browser and you can access loans and pay back with interest at your convenience.

3. Everyone now can no longer complain about the tedious procedures involved in accessing financial services because now you can do it yourself from the comfort of your home.

You don’t have to fill a form and wait for hours before you can get the attention of an employee, all you have to do is access your mobile application and use their self-service.

These Fintech companies provide softwares that allows you to carry out basic activities like booking a flight, buying groceries, paying for electricity, and even buying coffee and all these can be done in an instant from your smartphone.

4. The Fintech industry has offered a lot of opportunities for employment because of its vast nature there is a position for everyone. There are so many employment opportunities for; business analysts, data analysts, software engineers, data engineers, data scientists, UI/UX designers and so many others.

5. Because of the rise in fraud some persons might be skeptical about Fintech industries but you need not worry. Fintech companies are big on security so you can be rest assured that your personal information and your finances are safe.

6. Fintech industries have been a huge plus to merchants of cryptocurrency because they connect merchants to financial markets where they buy and sell crypto. The use of blockchain has significantly reduced fraudulent activities and allowed merchants to work seamlessly with their customers.

7. Fintech has allowed a lot of people who have no access to banking facilities have the opportunity to save money, send money and make huge investments to better their future. An example is the M-Pesa app which has helped connect a lot of people around the world.

M-Pesa is a Fintech company that made its rounds in Kenya and assisted a lot of people to own bank accounts and send and receive money through their mobile phones. Now, this Fintech company has expanded to other regions like; Tanzania, South Africa, Egypt, Ghana, Albania, and even India.

M-Pesa has no physical branch but yet all the financial services provided are done seamlessly with no complaints from their customers.

8. Fintech companies have provided their users with the privilege of choosing from a wide variety of payment options. Now you can make payments with the platform you’re most comfortable with.

9. FinTech companies now assist their users in making life-changing investments with the use of a software called robo-advisors. These robo-advisors ask users specific questions which will help the software provide an investment strategy specifically for you. These robo-advisors help you make low-risk investments to secure your future.

Examples of robo-advisors are; wealthfront, betterment, Schwab intelligent portfolio, questwealth portfolio, and so on.

Conclusion

Well, that’s it. The 6 popular types of Fintech and how they work, Fintech companies as we can see have way more pros than cons. Fintech companies have been able to do a sensible disruption in the traditional financial industry and encourage them to upgrade in order to serve their customers better.

Fintech has been able to save economies and create a relationship between different nations. We certainly believe that Fintech is here to stay and we should embrace this evolution with open arms because it is the future.