what is fintech in this video i want to run through the definition of fintech is
as it gets thrown around a fair bit as one of the buzzwords in the iot domain
we work with a number of companies that are defined as fintech it's an area where i spent
a lot of my time building products and software in the fintech space i'm going to approach this
video from the standpoint of custom software development because fintechs realistically
are custom software they're a platform that's in the financial space that's backed by technology
i'm going to run through four key points in this video to describe how fintech are
firstly how is fintech defined secondly what are the types of fintech thirdly what and who
are the fintech leaders and finally what role does custom software play in the fintech space
i'm matt grace managing director flying donkey let's get into it
first up how is fintech defined fintech is essentially the combination of the words financial
and technology to form fintech essentially it's the use of technology in the financial space
in order to drive efficiencies improve features and lower cost i'll list out a few areas impacted
by fintech companies but this range is always expanding month on month some of the big spaces
we see fintech companies playing in are mobile payments insurance blockchain financial services
and generally banking fintech really concentrates on innovating the way that financial services are
delivered and how money is transferred from person to person either in a country or around the globe
while you may have heard of the term fintech a lot of the companies or banking products you use
are probably considered to be fintech companies in previous videos i've briefly spoken around some of
the logics and algorithms that go into various software products because the fintech space is
something we deal in i'm fairly familiar with how things operate there i have discussed things
around the blockchain and ai versus rules based and these two technologies are very pertinent to
fintech corporations in financial services technology really drives a huge portion of
their business and they're always experimenting on how blockchain and other technologies can
improve their business but to summarize what is fintech it's simply the combination of technology
in the financial space in order to bring together better outcomes and features for their clients
while driving efficiency and costs all right point two let's look at some examples about
what are types of fintechs generally speaking the products offered by the banks are very slow
to adapt and move banks are large corporations with many 10 potentially hundreds of thousands
of employees with systems operating for many millions of clients in the fintech space what
happens is a company will come along who's nimble and agile and literally wants to pick
off just one small component of a bank let's just say for example a bank offers a hundred services
a fintech will come along and try and innovate in one or two of those areas because they're only
concentrating on a smaller subset of the features it's easy for them to deliver a new and modern
technology let's have a look at a few of these in practice mobile payments so our mobile payments
are generally considered commonplace these days it wasn't always the way and it was fintechs who led
the way in the mobile space prior to banks coming on board now why banks have the customer base and
the feature set already online they didn't bring that to mobile payments until very much later
a good example of a fintech in this space is wise or transferwise they are an overseas based company
but they're ones who've innovated in the fx space they allowed mobile payments to any country around
the world or a mobile platform almost instantly wise approached the problem differently to how
banks had previously done it and that is using a peer-to-peer model of not actually sending money
across borders in traditional foreign exchange payments money is sent to a centralized exchange
for example to exchange australian dollars for usd but in wiser's case two of their founders founded
the company a slightly different way and this is where the innovation began one of the founders
was from eastern europe and he moved to london and another one of the founders was in london
and he moved to eastern europe essentially they were living in each other's home towns now when
they got their salaries paid they each had to go and exchange this money on an exchange and
lose between three and five percent they thought to themselves there has to be a better way and
wise or transferwise as it known was born simply speaking rather than paying across the markets
and losing their three to five percent each person in their country received their dollars and paid
for it in that country for example the guy who was from eastern europe and lived in london paid for
the guy who moved to eastern europe directly to his london bank account they agreed on the middle
rate of fx and therefore they actually skipped all the exchanges wise is now just the combination
of this process put into technology to form a formidable fintech why it's recently ipo'd and is
now valued at a multi-billion dollar company wise is a fintech who innovated in the space of mobile
payments particularly in foreign exchange and they've done really well banks are now starting
to offer a similar service or are partnering with these fintechs to provide the same service
insurance industry let's take a quick look at another example of how the insurance industry
is becoming a fintech again if we look at something that's going to drive this it's going
to be an innovative change now insurance as a product hasn't really changed in hundreds of years
you pay your premium and you receive the payment if something goes wrong with the advent of mobile
phones and also as internet of things technologies insurance companies could monitor and track things
like never before one key thing here was that car insurance so for car insurance the more you use
the car obviously the more risk you are of having a crash so what they did was they put trackers in
people's cars either on their phone or with a small device and people who use their car less
or operated in a more safe manner their premiums reduced and for people who drove more recklessly
or had more crashes their premiums increased this is a technology product in the finance space and
therefore it's considered a fintech product again once these fintech people start innovating the
larger companies will take this on board either through acquisition or adding a feature of their
own and it becomes more commonplace but this is a good example of fintechs in the insurance space
mobile banking again fairly common place these days but it is considered a fintech
being able to check your balance view a statement or pay a payment on the go on your mobile phone
without talking to anyone in a call center is a technology revolution this mobile payment is now
commonplace and generally all the big banks offer this functionality but again this is technology
driving financial innovation and realistically it allows banks to lower costs and improve efficiency
mobile payments on their own are considered a financial technology and therefore could
be shortened to be a fintech cryptocurrency and blockchain has really been the buzzword for the
past five or six years and i've done a previous video on my thoughts on the blockchain i think
the technology is interesting its applications so far have been lacking and some of the things that
i was trying to achieve are actually achievable slightly easier in traditional technology you can
watch more on that video on our blog regardless blockchain and cryptocurrency are both financial
technologies and therefore sit under the fintech banner then we're operating around the revolution
of the blockchain technology and they're more concentrating on the decentralization public
publishing and irrigability of the blockchain some of these things in the future may become very key
pivotal points of a future fintech for right now the actual application of these technologies is
yet to be proven while small-scale things have come out of the blockchain and cryptocurrency
technology and obviously on blockchain is the bitcoin bitcoin has obviously taken the world by
storm as an investment asset but as far as used for payments it is used for payments but due to
its high volatility it doesn't really lend itself very well to payments again i mentioned more of
this on my previous video i still think possibly in the future blockchain will find its home
and will drive the next generation of fintechs but for now the technology needs to mature and
find its home in a piece of functionality that makes sense for a business to drive it all
right what are fintech lenders if you go back to when i started i said that essentially a fintech
is a business that picks off one or two small sections of what a bank does now one of the
key parts of what a bank does is it lends money out to people obviously it does many more wide
things like taking deposits insurance products etc but if we concentrate here on lending these
key parts become their standalone fintech a couple of key examples here are what fintech lenders are
they could be a traditional home loan provider they could be a business loan provider or they
could be a peer-to-peer lending marketplace if we just break down the home loan lending for a moment
what essentially we're saying here is a business that stands alone and all they do is lend money
for home loans and obviously you can see what this means a fintech that is a home loan lender
only concentrates on lending home loans it's going to concentrate on building out a platform that's
going to be a fintech product this product is going to concentrate on a great onboarding process
most probably trying to reduce on boarding times therefore if you're looking to refinance
and you're looking for a home loan product and you want onboard in a more seamless way you'll
probably look at one of these fintechs rather than the big four banks these companies are innovating
in the space of lending but to be totally honest a lot of these companies are backed by the banks
themselves because obviously they don't run a deposit arm they need to source the funds
for these loans and that's why they truly are a fintech product what i expect to see over the
coming years is more and more of these products to be absorbed by the banks and therefore the
fintechs will be acquired and their products should be rolled out on the banks platforms
themselves a good example of this is tiktok who's a home loan only lender ticktock is backed by
bendigo and adelaide bank and the reason for here is pretty simple as i mentioned while they're an
innovator in the home loan space essentially that is writing of loans they still need funds
to do that and bending on adelaide are the ones who provide that facility for them obviously if
anyone in adelaide want to slice the pie cell owned part of the lender with the idea being
that in the future they may potentially acquire them this is what fintechs are they're smaller
more concentrated companies that concentrate on innovating in technology in the financial space
what is the role of custom software in fintechs well i hope that's fairly obvious now because
fintechs are essentially custom software platforms that are concentrating in the financial space in
technology obviously every single fintech is gonna have to build their own custom platform
and integrate out with a number of other platforms whether that be the home loan provider tick tock
that we mentioned wise or transferwise as we mentioned around payments or a bank itself trying
to innovate in one of its products all these fintechs are essentially technology plays in
the financial space trying to drive innovation improve efficiency and lower cost if you're
looking to launch a fintech or interested in the financial space and how technology can approach it
fear flying donkey we have a number of clients in this space and we're happy to share our experience
with you if you want to start a fintech feel free to get in touch and let's have a chat
you