Different Types and Categories of Fintech

July 22, 2021

Fintech, or financial technology, refers to new technology that enhances and automates the supply and usage of financial services. Fintech, or financial technology, assists company owners and consumers in better managing their financial operations, procedures, and lives via the use of specialized tools. When the word "fintech" first appeared in the twenty-first century, it was first used for the technologies applied at the back-end systems of renowned financial institutions. ​

However, there has been a transition to more consumer-oriented services and, as a result, a more consumer-oriented definition since then. Fintech today encompasses a wide range of sectors and businesses, including education, retail banking, fundraising and charity, and investment management, to mention a few. Fintech also encompasses the creation and usage of cryptocurrencies such as bitcoin. While that sector of fintech receives the most attention, the real money remains in the conventional global banking business and its multi-trillion-dollar market cap.

Fintech firms are such businesses that assist financial institutions in modernizing their systems, procedures, and operations. Various firms continue to change the future of finance as FinTech start-ups rush to satisfy market expectations. The field of fintech is emerging with every potential of combining technology and finance, and for the time being, we may describe it as follows. Fintech is a vast and complicated field. There’s a recurring region inside Fintech that encompasses numerous distinct areas within finance and banking throughout the last decades. 

Fintech categories and domains:

  • Insurance (InsurTech) :

Insurtech is the application of technological advances to improve the efficiency of the present insurance industry. Insurtech allows products to be priced more competitively by utilizing technology such as data analysis and AI. There are challenges for insurtechs, including regulatory problems and a reluctance on the part of traditional insurers to collaborate with them.

  • Regulatory (RegTech) :

The administration of regulatory processes in the financial industry is referred to as RegTech. Regtech's primary duties include regulatory monitoring, reporting, and compliance. It is made up of a group of enterprises that assist businesses in complying with laws in an efficient and cost-effective manner.

  • Lending Technology (LendTech) :

The goal of lending technology, also known as LendTech, is to use technology to provide customers with loan solutions through more accurate and faster processes. Smart LendTech systems may process and validate identification credentials using Artificial Intelligence (AI) and Machine Learning (ML) algorithms to provide error-free outcomes.

  • Trading Technology (TradeTech) :

Trade technology, often known as TradeTech, facilitates and supports cross-border trading by utilizing IT systems in supply chain financing and asset distribution channels. The goal is to lower the information costs of global trade, make trade financing more accessible, and enhance the openness of trading processes for firms and customers.

  • Robo-advisors :

Robo-advisors are online services that offer automated, algorithm-driven financial planning services with very little human oversight. A typical robo-advisor takes information about a customer's financial state and future objectives via an internet questionnaire and then utilizes the information to give advice and effectively invest client funds.

  • Stock- trading apps :

As more traders and investors use phones as their primary device, Fintech firms are striving to strengthen their mobile applications, which attracts more mobile users. The finest online investing applications provide a seamless experience across desktop and mobile platforms, as well as the ability to share watch lists and notifications as well as capabilities like stock screeners and depositing cheques into your account.

  • Finance for Individuals (WealthTech) :

This branch of FinTech focuses on improving wealth management and retail investment services by leveraging technology to supplement and provide functions in a more effective and efficient manner. These digital solutions are utilized to improve current systems and develop new ones in order to make them available to new stakeholders such as investors.

  • Payment Technology (PayTech) :

Paytech, as the term implies, refers to any transaction including technology. It is a subset of the financial technology (i.e. fintech) sector that focuses on transactions and payments instead of finance overall.

  • Banking for Individuals (BankTech) :

Many financial institutions are leveraging digital technology in order to deliver their services in a more agile and responsive manner. BankTech entails the use of digital platforms to provide financial products and technologies to consumers.

  • Money Transfers Around the World :

Internal money transfers have always been prohibitively costly. These costs can easily pile up when dealing with significant sums of money. Worse, conventional transfers are time-consuming. This class of financial technology firms provides quicker and affordable global money transfers.

  • Equity Financing :

Firms of this FinTech industry make it simple for enterprises to raise capital. Some businesses seek to match accredited investors with pre-vetted entrepreneurs. Others employ a crowdfunding approach, allowing everyone to invest in new enterprises. These companies make it easier for businesses to raise funds. Virtual fundraisers are also more convenient because all of this can be done online.

  • Cryptocurrencies :

Fintech also includes the development and use of crypto-currencies. This emerging hotspot of global and transparent financial innovation in the cryptocurrency economy is yielding tangible, programmable, and modular technologies like smart contracts, Peer-to-Peer, Proof-of-Work transactions, blockchain-powered investing and trading solutions, open ledgers, and immutable records that are impacting the growth of financial services.

The cryptocurrency economy is paving the way for the creation of an alternative financial and technical infrastructure that is worldwide, open source, and available to anybody with internet connection, regardless of nationality, ethnicity, color, gender, or social status.

Today, millions of people are testing automated technologies in real life with billions of dollars, which could presumably evolve and result in the wider global financial inclusion of billions of under- and unbanked populace tomorrow via easy-to-set-up and low-cost automated financial services at scale.

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