Fintech, a combination of "financial" and "technology," refers to businesses that use technology to improve and automate financial services and operations. The term refers to a rapidly expanding industry that serves both consumer and commercial interests in multiple ways. Fintech applications range from payments, digital banking and insurance to cryptocurrencies and investing, saving and lending apps.

Initially, the phrase referred to the technology employed by banks and other financial organizations in their back-end systems, but its definition has now evolved to include consumer-facing services. Technology has impacted traditional finance over the years, most notably in the consumer sector, where access to financial services and payment methods has increased dramatically.

Fintech now encompasses retail banking, education, investment management, nonprofit fundraising, and more. However, the most well-known aspect of fintech is the development and utilization of cryptocurrencies such as Bitcoin, Litecoin, and Ethereum, to name a few.

In addition, Fintech broadly refers to any organization that uses the internet, cloud services, mobile devices, or software technology to connect to or use financial services. That money you paid your pal for a nice dinner through Venmo? Fintech. That PayPal payment you submitted for the purchase of new gadgets? Fintech. That exclusive online bank? Fintech. Those fractional shares you purchase on the market using your phone?  Fintech.

The digitalization of the financial industry has accelerated in recent years, and investing in fintech has emerged as an appealing wealth-building opportunity for investors.

According to KPMG, worldwide fintech investment totalled $210 billion in 2021. The firm chose the term "expansion" to define the fintech market for the year, as the investment amount was twice that of the previous year.

KPMG attributed 2021's success to increasing transaction sizes across various fintech subsectors, including Cryptocurrencies, Blockchain, Wealthtech, and Cybersecurity.

According to Vantage Industry Research, the worldwide fintech market is projected to grow at a compound annual growth rate (CAGR) of around 19.8% between 2022 and 2028, reaching a market value of approximately $332.5 billion.

Fintech businesses are described as those that use innovative business models and technology to facilitate, improve, and disrupt financial services. Based on their existing capacity to make significant contributions to the world as we know it, the following are today's prominent examples of Fintechs.

Digital banks

Digital banking is the primary focus of the majority of financial technology businesses. In the context of personal finance, customers' demands for mobile access to their bank accounts have increased with the emergence of digital-first banks, often known as neobanks. The majority of big banks now provide some form of mobile banking. Neobanks are banks without physical branch locations, offering checking, savings, payment services, and loans on an entirely mobile and digital infrastructure. Open banking refers to the fact that certain banks let third-party software programs access a user's financial information.

Given that there are 5.11 billion unique mobile users globally, it is not surprising that global mobile payment transactions are anticipated to hit $4.3 trillion by 2023.

Indeed, the worldwide adoption of mobile payments has been nothing short of astounding.

Cryptocurrencies

Fintech includes the development and distribution of digital currencies such as Bitcoin, Ethereum to name a few, and it is anticipated that continued expansion in cryptocurrency availability and adoption will have a beneficial impact.

In the last few years, several crypto trading platforms have evolved, enabling users to trade various cryptocurrencies and take advantage of decentralized exchanges. Additionally, various crypto wallets have emerged to safeguard the digital cash of individuals. Several fintech businesses also use blockchain technology for payment processing, money transfer, and secure digital identity management.

Robo-Advising and Stock-Trading Apps

Robo-advising has changed the asset management industry in recent years. This cutting-edge technology employs algorithmic intelligence to provide logical asset recommendations.

Robo-advising has enabled portfolio management to attain new levels of efficiency, including a reduction in expenses. Potential investors may now assess many investment options effectively.  It's no surprise that a rising number of Robo-advising businesses are emerging.

Historically, investors had to physically visit stock exchanges to purchase and sell stocks. Today, stock trading platforms enable investors to trade stocks on their smartphones with the tap of a button.

With cheaper and low-minimum stock-trading applications available, investing has never been simpler. Due to these fintech advancements, the development of these stock-trading applications may now be performed anywhere and at no cost.

Insurtech

Fintechs are making insurance more accessible to underrepresented populations. The traditional method of insurance entails utilizing tables to assign each client to a risk level and grouping customers together to ensure lucrative policies for the organization. This implies that some individuals wind up paying more than they should due to the volume of data used to categorize them.

Insurtech uses GPS monitoring of automobiles, wearable activity monitors, and more methods to watch your car's data, including your average speed, braking habits, and more. Ultimately, this enables insurance firms to create more precisely defined categories of risks, resulting in more competitively priced policies.

Crowdfunding

Fintech is revolutionising the equity financing process as well. Historically, investing in private companies at the early stage has been reserved to a meagre group of people. People within an entrepreneur's network, people in the Venture Capital industry or Angel Investors who are usually called accredited investors (meaning they earn over $300,000 or have over $1 million in assets).

Today, Crowdfunding platforms enable access to these same opportunities to a broader group of investors, willing to participate from as little as $10. This also benefits Founders looking to raise capital significantly as they don’t need to know anyone who falls in the aforementioned group.

Fintechs in this category seeks to connect investors with promising entrepreneurs. Others employ virtual fundraising to enable investments in new businesses.

Crowdfunding platforms allow founders to pool funds online or via mobile applications in one centralized location. It is now faster and more efficient for companies to directly approach investors for funding rather than relying on more conventional fundraising channels.

The rise of Fintech is attributed mainly to the opportunity it provides small firms to compete on the same playing field as established banks and financial institutions. As a result of FinTech, it is no longer about who is the largest, but rather about who is the quickest and most responsive in meeting the ever-changing needs of consumers. Additionally, FinTech businesses no longer provide "one-size-fits-all" solutions. Instead, they provide specialized – and sometimes niche – services that satisfy a specific financial need, generally at significantly cheaper prices than conventional financial providers.

Companies in the financial technology industry that can effectively innovate and provide new answers to old problems, will succeed as customers continue to grow more savvy and connected.