What makes a company a ‘Fintech’?

What makes a company a “Fintech”? By having a website or a mobile App, it does not mean a company is necessarily a “Fintech” per se in this era. Before answering this question, we must address what Fintech means. The word Fintech is currently used in two  different ways: for the technology as well as for companies harnessing particular technologies and features. Therefore, we can give Fintech the following two definitions:

  1. Fintech refers to advanced and emerging technologies used in the financial industry to enable greater access to financial services, innovative products and alternative modes of finance and investments.
  2. Fintech refers to companies leveraging advanced and emerging technologies to deliver financial products and services.

Finance and technology have been crossing paths for decades; and from this angle, “Fintech” has been around for several decades. However, Fintech comes in waves; Each era’s Fintech is different from the former. The industry is calling the current era as Fintech 4.0, which distinguishes itself with artificial intelligence, APIs, blockchain, automation, cloud and XaaS (anything-as-a-service). Fintech 3.0 was about the smartphone and the general digitalisation of financial services. Fintech 2.0 was the deployment of the internet in the financial markets. Fintech 1.0 was reflective of infrastructure and international communications in the financial markets.

 

For a company to be regarded as Fintech in the 4.0 era,  it should generally satisfy the following three axes:

 

source: Fintech Circle, 2020

 

X-Axis: Financial sector

  • Retail banking
  • SME finance
  • Corporate and investment banking
  • Alternative finance
  • Investment banking
  • Trading
  • Asset management
  • Private banking
  • Trading
  • Microfinance
  • Insurance
  • Foreign exchange/currencies

Y-Axis: Business model

  • Business to Consumers (B2C)
  • Business to Business (B2B)
  • B2B to Consumer (B2B2C)
  • Business to Government (B2G)
  • Platform
  • Crowdfunding
  • Peer to Peer (P2P)

Z-Axis: Technology

  • Cloud computing
  • Big data
  • Artificial intelligence
  • Machine learning
  • Blockchain/DLT
  • Internet of Things
  • Quantum computing
  • Virtual reality
  • Augmented reality

A company which meets any of the above x,y and z axes can be considered as a ‘Fintech’ in this era. Fintechs generally have some of the following features:

  • Mostly digital and remote existence
  • More partnerships and services/SaaS-based
  • Innovative user interfaces
  • Use of AI/analytics/big data
  • Generally, start-ups
  • Very few legacy systems
  • Cloud-based
  • Sandboxed
  • Crowdfunded

Fintech 4.0 is all about disintermediation, disruption and enabling of financial services, creating a more decentralised system of finance.

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