By Ashley Preen

March 17, 2021

What Is FinTech and Why Is It So Popular?

FinTech stands for “Financial Technology” and it is revolutionising the way businesses and individuals do banking or manage their finances.

It’s likely that you’re already using some sort of FinTech in your life: If you ever pay for things with your phone’s contactless feature, that’s FinTech. If you have a crypto-wallet on your phone, that’s FinTech.

When did FinTech start?

Technically speaking, “FinTech” actually goes back as far as the 1960s when things started shifting from analogue to digital, and Barclays installed the first ATM in London. (This event was rather prescient, in retrospect, seeing as London is considered the FinTech capital of the world.)

Tech progressed rapidly from that point, with the opening of the first digital stock exchange in the 1970s, the introduction of powerful mainframe computers in the 1980s, and finally, the slow shift into online banking.

But that’s not what people think of when we use the word “FinTech” today.

The revolution in FinTech that we see now — where you can do things such as open a bank account entirely online, open an investment account or even raise capital for your business entirely from your phone — began in 2008, after the financial market crash, driven primarily by distrust of the central banking system. (For an in-depth understanding of FinTech’s history, have a look at this article.)

What typical services does FinTech offer?

The types of services offered by FinTech companies are limited only by the ingenuity of the creators of those services.

Startups drive FinTech, and the keynotes of a startup are ingenuity, innovation and disruption.

FinTech powers crowdfunding platforms, personal and business banking services, crypto-wallets and cryptocurrency exchanges, insurance, stock-trading, AI-driven wealth and finance management, personal finance apps and tons of other services.

Here are just a handful of some of the biggest FinTech companies around and the key service they offer which disrupted the market:

1. Wise (previously TransferWise):

Open an online bank account in multiple countries and currencies in just minutes. Receive interbank exchange rates to sell and buy currencies with only a minimal fee involved. Wise is also one of the few services that let non-US residents open a US bank account.

2. Revolut:

Open an online bank account in just minutes, both for business and personal use. Forex at interbank rates. Numerous features to make managing personal finances easy. [1] 

3. Kabbage

Online money lending, providing capital for small businesses up to a cap of $250,000.

4. Avant (previously AvantCredit):

Personal loans powered by AI.

5. Root Insurance:

Insurance app which monitors driving habits through a smartphone app and can thereby lower premiums by only insuring “good drivers.”

6. SoFi (“Social Finance, Inc.”):

This San Francisco-based FinTech company specialises in personal loans, student loans and mortgages. It has a AAA rating from Moody’s.

7. Klarna

This is Sweden’s largest FinTech company. It provides financial services to businesses, including debt collection services.

8. Chime:

A completely online bank.

9. Square, Inc:

This company makes it possible for anybody and everybody to accept physical credit card payments in their store, utilising both a hardware and software solution to achieve this.

10. Square, Inc: Robinhood:

By now, almost everyone has heard of Robinhood in light of the GameStop fiasco. This company makes it possible for anyone to become an investor.

11. Stripe

These days, Stripe seems to be everywhere. Stripe facilitates online payments, taking a small cut from every card transaction that it runs. It also offers top-of-the-mark fraud detection services.

Why are people adopting FinTech so enthusiastically?

The short answer is that FinTech makes traditionally cumbersome tasks easy to carry out. 

Also, because FinTech is currently being driven by startups, they have to put user-adoption at the forefront of their priorities. To obtain user adoption, their services need to perforce get rid of obstacles to the user experience.

By making their services user-centric, they do away with many of the traditional barriers which make financial services such a chore such as taking your ID to the local branch of your bank, filling out endless forms, having to stand in line for ages, enduring prodding credit checks, etc.

By putting the user experience first, FinTech companies are forced to:

  • Be transparent
  • Offer superior customer service
  • Actually help you when you have a problem
  • Be accountable.

Is FinTech right for your business?

Without knowing anything at all about your business, I can still tell you with some degree of certainty that, “Yes, some or other aspect of FinTech could probably be beneficial for your business.”

Our clients use a multitude of different FinTech services, either by choice or through necessity. (We have many e-commerce customers, and it’s impossible to run an e-commerce store without using some degree of FinTech to process payments.)

Our clients use a multitude of different FinTech services, either by choice or through necessity.

(We have many e-commerce customers, and it’s impossible to run an e-commerce store without using some degree of FinTech to process payments.) The most likely FinTech service you would probably start within your business would be an online banking service or a service that allowed you to take payments online.

Is FinTech right for your business

All these services offer a personal version that you can use to test it out and get comfortable with before jumping into the business version.

The trick is to start small, get your toes wet and then see if the full gamut of that company’s services is for you.

We have specialists here at Pearl Accountants who can advise you on many different types of business FinTech services if you ever need any help.

Please note that the Revolut link is still not working on this page.