IT Applications & Fintech

What is Fintech (Financial Technology)?

• Fintech is a combination of the words “finance” and “technology.”

Although it’s a blanket term that can mean many different things,
broadly speaking, it describes the evolution of an industry where new
technology use-cases are developed and deployed to streamline more
traditional-looking finance functions.
• Fintech refers to software, algorithms and applications for both desktop
and mobile. In some cases, it includes hardware, too—like internet-
connected piggy banks. Fintech platforms enable run-of-the-mill tasks
like depositing checks, moving money between accounts, paying bills or
applying for financial aid. They also facilitate technically intricate
concepts, including peer-to-peer lending and crypto exchanges.
What Is Fintech Banking?

• Banks use fintech for back-end

processes—behind-the-scenes
monitoring of account activity,
for instance—and consumer-
facing solutions, like the app you
use to check your account
balance. Banks also use fintech
to underwrite loans. Individuals
use fintech to access many bank
services, including paying for
purchases with a smartphone
and receiving investing advice on
their home computers.
What is Fintech (Financial
Technology)?
• While the general public typically associates fintech with
really cutting-edge new concepts like blockchain and
algorithmic trading, the term applies to a very wide variety
of much more “boring” applications. They include, but are
not limited to, everyday banking, insurance, and other back-
office risk management functions.
What is Fintech (Financial Technology)?

• Mobile banking – something

that hundreds of millions of
people around the world take
completely for granted – is
actually technology
supporting the delivery of
traditional banking services.
• Even your Starbucks app is a
form of financial technology
in that it facilitates payments
and a proprietary rewards
program using a mobile
device.
Understanding Financial Technology
• Fintech is considered by many to be a relatively recent
development, which is not entirely accurate. While it has
evolved very quickly over the last decade, that’s mainly due to
advancements in technology, more generally, which are now
being applied to the finance sector.
Understanding Financial Technology
• Financial institutions have sought to streamline service
delivery and cut costs by using technology for many decades,
including the advent of the first 
automated teller machine (ATM) as far back as the 1960s.
Even credit cards, which predate ATMs, were a revolutionary
technological advancement in the payments space relative to
cash and cheques.
Understanding Financial Technology
• The technologies that underpin fintech business models vary
considerably. They include blockchain technology, artificial
intelligence (AI), machine learning, and other big data
functions like robotic processing automation (RPA). Each use
case is unique, but the underlying theme is a collective effort
to disaggregate the financial services sector, which,
historically, has enjoyed a highly protected status due to
high levels of regulation.
Fintech
• Think back, for a moment, to your pre-Covid-19 life. In those
less socially distanced days, fintech was the unsung hero of your
Friday night.
• You deposited your paycheck by snapping a photo on your
smartphone and uploading it using your bank’s mobile app. You
checked Mint to gauge your monthly entertainment budget. At
dinner, you and your friend split the tab using Venmo. Later,
you tapped your phone at the bar to pay for a drink. When it was
time to head home, you hopped in an Uber and paid for the ride
with a stored credit card
Fintech
• Even if you don’t realize it, fintech is likely a big part of your
personal and professional day-to-day. Ernst & Young’s latest
Global FinTech Adoption Index shows nearly two-thirds (64%)
of the world’s population was using fintech applications in 2019,
up from 16% in 2015. According to the report, 3 out of 4
consumers had become users of money transfer and payment
solutions.
How Does Fintech Work?
• Fintech provides people and businesses with access to
traditional financial services in innovative ways that previously
weren’t available. For instance, many conventional banks’
mobile apps now offer customers on-the-go access to bank
services, including the ability to view your balance, transfer
funds or deposit a check. Meanwhile, robo-advisors like
Betterment are less costly and more convenient than in-person
investment advice from a financial advisor.
How Does Fintech Work?
• Fintech also automates many services businesses use, such as
loan underwriting and real estate appraisals. Artificial
intelligence combined with massive troves of consumer data
helps fintech businesses understand their customers and powers
their marketing campaigns, product development and
underwriting.
How Has Fintech Evolved?
• Just because fintech is buzzy doesn’t mean it’s brand-new.
Although Merriam-Webster just added the phrase to its
dictionary in 2018, the concept dates back decades. ATMs, for
example, were once on the cutting edge of fintech innovation, as
were signature-verifying technologies first used by
banks in the 1860s.
How Does Fintech Affect Me?
• The financial services sector isn’t typically synonymous with
nimbleness. But today, adaptability and quick iteration are
precisely what consumers and business owners expect—and,
increasingly, need.
• Fintech helps expedite processes that once took days, weeks or
even months. Fintech also holds the potential to 
improve financial inclusion: In some parts of the world, where
governmental or institutional support is lacking, fintech fills
needs for the unbanked.
How Does Fintech Affect Me?
• Part of the reason fintech can streamline traditionally clunky
processes is because it’s based on ones and zeros rather than
human skills and opinions.
• While many fintech platforms include elements of both
traditional brokers/advisors and algorithms, others help users
navigate financially complex tasks without interacting with a
human at all.
How Does Fintech Affect Me?
• Today’s consumers can bypass traditional bank branches for
things like applying for a loan (LendingClub) or even a mortgage
(Better).
• Casual investors no longer need to meet face-to-face with
financial experts to painstakingly go over the ins and outs of
their portfolios—they can peruse their options online or even
enlist the help of chatbots to make decisions.
How Does Fintech Affect Me?
• To illustrate just how far fintech has brought the financial services
world into a Jetsons-style reality, look no further than robo-advisors.
• These digital platforms provide automated, algorithm-informed
investment suggestions and financial planning advice with little-to-
no human oversight.
• Ultimately, the answer to the question of how fintech affects your life
is a case-by-case matter. Outside of tasks like online account
monitoring, which has become ingrained into day-to-day
banking, the impact of fintech on your life is a personal
issue dictated by how many services you choose to interact
with. You can go as deep as you want or simply stay surface-level.
Is Fintech Safe?

• Engaging with fintechs—many of which remain largely

unregulated, particularly in the Wild West realm of
cryptocurrencies and blockchain technologies—can lead to
unwanted or unexpected threat exposure.
• The idea that fintechs adhere to a higher moral standard than the big
banks is proving largely illusory. As fintech expert Ron Shevlin points
out, banks and customers engaging in “fintech fetishism”—an
excessive optimism associated with its early iterations—are now
facing a harsh reality check as many promising startups face obstacles
both due to and independent of the Covid-19 pandemic.
Is Fintech Safe?

• It’s prudent to approach flashy, yet unproven, fintechs and their

lofty promises with a healthy dose of skepticism. As digital data
becomes orders of magnitude more extensive and integral to
day-to-day life, so, too, do large-scale security snafus. Recent
hacks, including high-profile bitcoin heists, have brought these
risks to public consciousness.
Is Fintech Safe?

• To date, there’s no consensus on exactly how safe fintech solutions

are across the board. Such assurances will likely be difficult to come
by, given the scope and scale of fintech proliferation. But consumers
are wise to be wary: In the E&Y survey, 71% of fintech adopters
agreed with the statement, “I worry about the security of my personal
data when dealing with companies online.”
Fintech and New Tech
• Of all the technologies that have impacted financial services, the
distributed ledger technology that underlies blockchains and
makes cryptocurrencies possible is arguably the most
significant. But lower-profile emerging technologies may be
even bigger influences down the road. Some of the most
intriguing include:
Fintech and New Tech
• Internet of Things. ATMs that can detect how many customers are in line are a
good example of this, as are sensors that enable contactless transactions.
• Augmented reality and virtual reality. Virtual stock trading is one potential
use for these still-emerging technologies.
• Smart contracts. Contracts that can automatically execute when certain
conditions are met can improve security, increase efficiency and lower the cost of
transactions.
• Bots. Also known as robotic process automation, these programs to automate
repetitive tasks can free up humans from routine work, enabling them to focus on
more valuable activities.
• Voice-enabled payments. Smartphones with voice recognition software let
people check balances, transfer money and complete purchases simply by speaking.