Exploring Some of the Most Successful Types of Fintech Available Today

Fintech is a term applied to the space where financial services and technology collide, providing innovative digital services that help people, businesses, and other organizations better manage their financial processes and operations.

In the 21st century, when fintech first emerged, the term initially applied to the technology used in back-end systems at established financial institutions. Over the years, fintech’s scope has evolved, correlating with a shift to more customer-centric financial services. Today, fintech encompasses various industries and sectors, including retail banking, investment managing, fundraising and nonprofit, and education. In this article, we will run through a selection of the most popular types of fintech on the market in 2021.

1. Cryptocurrency

Supported by blockchain technology, cryptocurrency is a form of digital currency that relies on encryption to regulate the generation of currency units and verify the transfer of funds. Although cryptocurrencies still have some way to go in terms of mainstream consumer acceptance, there is little doubt that digital currencies are poised to play a significant role in molding the financial landscape for years to come.

Rather than being issued and regulated by a government or other form of central authority, cryptocurrencies are generally decentralized. For example, Bitcoin relies on a public database of digital information that is virtually impossible to manipulate without detection.

2. Lendtech

This type of fintech integrates technology with lending solutions, enabling customers to access funding through more accurate, streamlined processes. Relying on smart systems, machine learning algorithms, and AI, lendtech processes and verifies identity credentials to ensure error-free results. It can also be effective at assessing the borrower’s track record, forecasting income prospects, appraising collateral value, and predicting possible changes through the inclusion of technology in the lending process.

3. Digital Banking

Banking systems have evolved considerably over the last decade, as they have been forced to adapt to an increasingly digitized world. Even the most conservative banks have had to change, which includes developing comprehensive collections of web and mobile applications to keep up with the evolving needs of their clients.

Mobile banking apps are just one aspect of digital banking. In recent years, we have seen a rise in online banks that maintain a solely virtual presence, making banking easier, faster, more convenient, and more inclusive by eliminating the need to visit brick-and-mortar branches in person.

Atom Bank is America’s first online bank to receive official licensing. Based on a mobile app, Atom Bank offers a full spectrum of financial services typically associated with traditional banks, including payments, savings, and mortgages.

4.   Regtech

Managing compliance and regulatory issues such as financial directives, anti-money laundering policies, and terrorist financing regulations, regtech leverages SaaS technology and cloud computing to help businesses and organizations comply with regulations inexpensively and efficiently. The main purposes of this form of fintech are to handle regulatory reporting, monitoring, and compliance.

Regtech helps financial institutions enhance risk management by analyzing patterns and management of vast amounts of information. Regtech solutions also help businesses keep current with changing regulations and compliance policies.

5.   Alternative Financing

Fintech’s largest domain today, alternative financing comprises four distinct categories:

  • Debt-Based Financing: Also known as social lending, debt-based financing is a popular avenue for small business owners seeking investment for their business. Debt-based financing eliminates financial intermediaries from the loans process, enabling lenders to profit from their investment in the form of interest and other fees.
  • Equity-Based Financing: Many small startups find themselves in the position where they need to sell equity to gain the injection of cash they need to take their business to the next level. This type of fintech enables entrepreneurs to secure funding from several investors at a time, providing a stake in the company or its assets in exchange.
  • Rewards-Based Financing: With this type of financing, businesses provide some type of incentive for investors to participate in their project and provide funding.
  • Donation-Based Financing: Investors receive nothing in exchange for their investment except a tax receipt and the reward of supporting a cause that resonates with them.

6.   Insurtech

Among the newest fintech formats, insurtech relies on technologies like apps to meet consumer demand, making insurance services more flexible and accessible.

With a distinctly risk-averse culture, the insurance industry remained largely unchanged for decades. Before relatively recent technological advancements, insurance was a somewhat uncompetitive market that remained resistant to change and had significant barriers to entry for new players. Suddenly, the insurance ecosystem has been transformed.

Rather than a handful of insurance companies dominating the industry as was traditionally the case, today, insurtechs have revolutionized insurance, springing up at a dizzying pace, each with its own competitive edge. From smartphone apps to claims-processing tools to online policy handling, insurtechs deal with every aspect of the creation, distribution, and administration of insurance, empowering consumers to take control of their insurance needs through a plethora of innovative insurance products.

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