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Fintech Companies: How They Work And How To Get Yours Off The Ground

Fintech or financial technology is a relatively new field that has taken off over the last ten years. Many new companies are making millions through their unique apps that offer a specific solution to a money-related problem. This article is about how fintech companies work and how to get yours off the ground. 

What Is Fintech?

Fintech is an abbreviation used to describe a company that works in the financial sector but is driven by its use of technology. Some fintech companies appear like regular banks, offering an alternative solution. A famous example would be Monzo, a company that shook up the banking sector and revolutionized banking on your phone. It could be argued that the success of fintech companies comes down to how they democratize the handling of a consumer’s money. With innovation and disrupting marketplaces, if you think you have the next big idea, you need to make sure it complies with all the relevant regulations. For example, Fintech Consulting is a new industry that specializes in advising new fintech companies on what they can and can not do. Understanding where your product will fit into the marketplace is really important as well as making sure you stay on the right side of the law. 

Who Is Involved?

The companies involved in the fintech market range from regular banks to small start-ups. Technically any bank that has a mobile banking app is involved in fintech. Usually, fintech companies exist to try and offer something that regular banks are not able to. Whether this is by; offering alternative payment systems, accepting cryptocurrencies, or providing unique loans, there is a huge demand for new and exciting alternatives. Now that fintech has taken off so massively, every major company wants a piece of the pie. 

Why Is Fintech So Big?

Fintech is massive for several reasons. Firstly, what makes fintech so profitable is data. If your company has a massive customer base that allows you to collect data on the way they spend their money, then you are quids in. This data is extremely valuable to other businesses as they will want to understand where people spend their money and try to figure out why. With more data, more accurate predictions can be made. New companies are willing to offer better benefits than regular banks so that they can collect this data and use it to make their profits. Any market that is involved in how people spend and store their money is going to be worth a lot of capital. 

What Drives Fintech?

The main driver behind fintech companies is data, more specifically, big data. You have probably heard people throwing around the phrase big data but you might be wondering what it means. The difference between data and big data is volume, velocity, and variety. The volume of the data needs to be massive, with millions and millions of data points being collected. Velocity describes the speed at which the data is collected and updated, most likely to be multiple times a day, if not minute by minute. Variety describes how the data collected on each person must not be limited to one specific field. The collection of big data is what has made fintech companies so huge in recent years. It is only in the last five to ten years that it has been possible to collect and store such a huge amount of data on people, now that server capacities are way higher. The collection of big data is what drives fintech companies and is how they make their money. 

The Future Of Fintech

The future of fintech is unknown but it is likely to be a bright one. As more companies spring up and more information is collected, a variety of things could happen. Take loan products, for instance. Traditionally, banks would be able to offer a few different products based on a broad set of criteria. You could imagine that with enough data collected, that fintech companies would be able to offer more and more tailor-made products, based on a much more specific set of criteria. This could be seen as a good or bad thing as it may mean that this vastness of information is used against people. Hopefully, however, it will allow for less discrimination to occur and give more people access to financial products that would have previously been declined. Naturally, fintech companies will be using this information to maximize their profits, which will probably come at the expense of the consumer. 

How To Make It

If you want to make it as a new fintech company there are a few things you need to do. The first thing is a general business rule, you need to disrupt the market. By founding a new company that offers something that no one else is currently, you are likely to be on to a winner. In fintech, this is becoming harder and harder as new companies are springing up all the time. There are still new avenues to explore and with the advancement of technology will come the advancement of financial technologies. If you haven’t already come up with your million-dollar idea then you should be keeping an active watch over the marketplace. Be on the lookout for potential gaps, or companies who are not reaching their full potential. The second and most important thing is to prioritize your data collection and analysis. Even if you cannot offer a brand new business idea, if you can sell your analysis as being better than anyone else’s then you will also be onto a winner. Making it in fintech will take a lot of time and money as there are some huge players in the game. Stick to your guns and you might just come out on top. 

Fintech, Ready For Lift-Off

The explosion in fintech companies over the last five years has been gigantic. It is no wonder that it is one of the hottest properties on the market as there is so much money to be made from it. By reading this article you should hopefully have a better understanding of how fintech companies work and how to get yours off the ground.