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Financial technology

Financial technology

Financial technology is the technology and innovation that aims to compete with traditional financial methods in the delivery of financial services.

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Edits on 27 Dec, 2022
Amy Tomlinson Gayle
Amy Tomlinson Gayle edited on 27 Dec, 2022
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Overview

Financial technology, also known as fintech, refers to technology that aims to improve and automate delivering and using financial services. Examples of fintech applications include roboadvisors, payments apps, peer-to-peer (P2P) lending apps, investment apps, and crypto apps. The term "fintech" initially referenced the use of computer technology applied to the back office of banks or trading firms but now describes a broad variety of technological interventions in personal and commercial finance.

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Wealth management technology (wealthtech)
Wealth management technology (wealthtech)
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Capital markets technology
Capital markets technology
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Capital markets technology is similar to wealthtech,; however, it provides a much larger frame of data to its users and customizable APIs. This technology is often paired with AI systems capable of detecting upcoming market trends and providing suggestions regarding how they should be addressed. Many capital market technology companies' capacities include CRMs, analytics, risk calculations, and more as part of their product portfolios.

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Technologies that are influential in capital markets include cloud technology, open architecture, artificial intelligence, mobile computing, and blockchain, and more. Capital markets firms' reliance on digital technology has increased in response to global challenges, such as increased competition from financial technology firms, fee compression, compliance concerns, aging IT infrastructures, and customer relevance and churn. Technology aids these companies in multiple ways, including the following:

  • Service and client retention: Real-timereal-time analysis of customer behaviors aiming to inform future product and service launches.
  • Automation adoption: AI-based systems aiming to leverage human workforce and machine usage.
  • Deployment of open APIs and services: Generalgeneral improvements in customer service and product development and release.
  • Adaptation to changing market conditions: Technologytechnology can help companies and organizations adapt to evolving market conditions.
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Insurtech
Insurtech
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Fintech has several technology components,; however, some of these components play a more significant role in the overall success of the industry. The technologies comprising fintech are as follows: application programming interfaces (APIs), distributed ledger technologies, and cloud-based delivery systems.

Application Programmingprogramming Interfacesinterfaces (APIs)

APIApplication environmentsprogram interfaces are a low-cost solution to software development. APIs are constructed as a set of reusable functions, procedures, and various tools. They allow for multiple applications, independent of language, media, or application type, to communicate seamlessly, enabling users to personalize and streamline their multi-application experiences. In addition, APIs enable users to access the core code components and build new applications while maintaining ownership of the resulting application.

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Distributed ledger technology systems are a type of ledger system that has multiple points of data collection synchronized across multiple sites, geographies, and institutions, allowing access from multiple locations. This system has no centralized location where data is stored, making it less vulnerable to cyber attacks and hackers. Additionally, each person with access has their own copy of the ledger that updates in real-timereal time, allowing any discrepancies to be managed efficiently. Distributed Ledgersledgers utilize the same technologies as blockchains, which isare used by BitCoin as its ledger system. Using a distributed ledger eliminates the potential for human error, providing clients with real-time data.

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FinTech is a transformative and “disruptive” innovation occurring within the financial services sector.

Primary Industries Powered by FinTech.

PayTech, WealthTech, Capital Markets Tech, and InsurTech all fall under the umbrella of FinTech as an industry; financial technology is not a standalone industry working independently, instead, it comprises several sub-industries creating better and more streamlined services.

PayTech
Subindustries

Financial technology comprises several subindustries: paytech, wealthtech, capital markets technology, and insurtech.

Paytech

PayTechPaytech, a term coined in 2018, is short for Paymentpayment Technologytechnology. A fast-growing industry, PayTechPaytech is developing new ways to make contactless payments through applications on mobile devices, cryptocurrencies, and even as wearable technology.

WealthTech

WealthTech is Wealth Management Technology and the digitalization of financial investing. WealthTech is increasingly disruptive as it provides consumers with key tools to become their own financial advisors. Many investment firms are working to integrate this technology to better serve their clientele and expand investment portfolios.

Capital Markets Tech

Capital Markets Technology is similar to WealthTech, however, it provides a much larger frame of data to its users and customizable API's. This technology is often paired with AI's that can detect upcoming market trends and how they should be addressed. Many Capital Market Technology companies include CRM's, analytics, risk calculations, solutions, and more within their software.

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InsurTech

InsurTech is short for Insurance Technology. This sub-sector of FinTech utilizes data to leverage savings and profit for insurance companies and their customers. Many insurance companies have employed deep learning AI's to remove the need for a broker entirely, allowing a fully customized mix of policies to complete a consumer's coverage at an affordable cost.

Payment technology companies

Wealth management technology (wealthtech)

Wealth management technology is the digitalization of financial investing. Wealthtech is considered a disruptive technology as it provides consumers with tools to become their own financial advisors. Many investment firms are working to integrate this technology to better serve their clients and expand investment portfolios.

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The Technology Behind Fintech Innovation

FinTech has several technology components, however, some pieces play a larger role in the overall success of the FinTech industry. The ingredients driving FinTech to the top of the financial sector are as follows: Application Programming Interfaces (APIs), real-time delivery, Distributed Ledger Technologies, and cloud-based delivery systems.

Application Programming Interfaces (APIs)

API environments are a low-cost solution to development. APIs are constructed as a set of reusable functions, procedures, and various tools. They allow for multiple applications, regardless of language, media, or application type, to communicate in a seamless fashion. This provides consumers with a real-time ability to personalize and streamline their multi-application experiences. APIs also foster a workplace culture of innovation and autonomy as anyone can access the code ingredients and build new applications that may enhance user experiences while maintaining ownership of the resulting application. This keeps companies utilizing API environments at the top of their proverbial “game” leading to fiercer competition and disruption within the financial sector.

Wealthtech companies

Capital markets technology

Capital markets technology is a broad term used to describe technology and services developed to support the technology needs of capital firms. Capital market technology leverages cloud computing services for the investment banking industry, aiming to introduce various improvements in digital banking operations.

Capital markets technology is similar to wealthtech, however, it provides a much larger frame of data to its users and customizable APIs. This technology is often paired with AI systems capable of detecting upcoming market trends and providing suggestions regarding how they should be addressed. Many capital market technology companies' capacities include CRMs, analytics, risk calculations, and more as part of their product portfolios.

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Real-Time Delivery

Real-time delivery is exactly that, instant notifications, and updates on financial decisions or consumer analytics. This could be a reflection of a purchase made and immediately seeing a notification via smartphone or it could be signing up for a bank account on that same smartphone in a matter of minutes and instantly being able to access and utilize its features. Real-time delivery has become more important as time has passed due to demand. Millennials have empowered a new age of technology where desired results are given nearly instantly and are additionally customizable to user's preferences. Real-time delivery is all about data and the instant ability to use that data to achieve set goals.

Technologies that are influential in capital markets include cloud technology, open architecture, artificial intelligence, mobile computing, blockchain, and more. Capital markets firms' reliance on digital technology has increased in response to global challenges such as increased competition from financial technology firms, fee compression, compliance concerns, aging IT infrastructures, and customer relevance and churn. Technology aids these companies in multiple ways, including:

  • Service and client retention: Real-time analysis of customer behaviors aiming to inform future product and service launches.
  • Automation adoption: AI-based systems aiming to leverage human workforce and machine usage.
  • Deployment of open APIs and services: General improvements in customer service and product development and release.
  • Adaptation to changing market conditions: Technology can help companies and organizations adapt to evolving market conditions.
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Real-Time Communications Companies

Echofin is a communication platform for financial teams and features financial widgets, webinars, and signals.

Symphony

Symphony Communication Services provides a cloud-based communications platform.

Capital markets technology companies

Insurtech

Insurtech is short for insurance technology. This sub-sector of fintech utilizes data to leverage savings and profit for insurance companies and their customers. Many insurance companies have employed deep learning AI systems to remove the need for a broker entirely, allowing a fully customized mix of policies to complete a consumer's insurance coverage.

...
Distributed Ledger Technologies

Distributed Ledger Technologies are a type of ledger system that has multiple points of data collection that are synchronized across multiple sites, geographies, and institutions, allowing access from multiple people. This system has no centralized location where data is stored making it less vulnerable to cyber attacks and hackers. Additionally, each person with access has their own copy of the ledger that updates in real-time allowing any discrepancies to be managed efficiently. Distributed Ledgers utilize the same technologies as blockchains, which is used by BitCoin as its ledger system. Using a distributed ledger removes all human error providing its clientele with accurate and real-time data.

InsurTech companies

Fintech

Fintech has several technology components, however, some of these components play a more significant role in the overall success of the industry. The technologies comprising fintech are as follows: application programming interfaces (APIs), distributed ledger technologies, and cloud-based delivery systems.

Application Programming Interfaces (APIs)

API environments are a low-cost solution to software development. APIs are constructed as a set of reusable functions, procedures, and various tools. They allow for multiple applications, independent of language, media, or application type, to communicate seamlessly, enabling users to personalize and streamline their multi-application experiences. In addition, APIs enable users to access the core code components and build new applications while maintaining ownership of the resulting application.

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Cloud-based Delivery Systems

Provide larger servers, meaning data is computed and managed faster than one central server located onsite. If an online company is not diligent with server capacity, a quick influx of users can easily crash their servers causing delays and unsatisfied consumers, which is where the benefits of a cloud-based system come into play. Companies like Amazon and Microsoft are providing cloud-based delivery to companies around the world large and small.

API companies

Distributed ledger technology

Distributed ledger technology systems are a type of ledger system that has multiple points of data collection synchronized across multiple sites, geographies, and institutions, allowing access from multiple locations. This system has no centralized location where data is stored, making it less vulnerable to cyber attacks and hackers. Additionally, each person with access has their own copy of the ledger that updates in real-time, allowing any discrepancies to be managed efficiently. Distributed Ledgers utilize the same technologies as blockchains, which is used by BitCoin as its ledger system. Using a distributed ledger eliminates the potential for human error, providing clients with real-time data.

...

Distributed ledger technology companies

Cloud-based delivery systems

Cloud-based delivery systems are used for their benefits of greater storage capacity and faster data computation and management compared to a single central server located onsite. Companies operating online require server capacity that matches the potential server load as a sudden influx of users can overload servers, causing delays and unsatisfied consumers. Companies such as Amazon and Microsoft are providing cloud-based delivery services to companies and organizations of all sizes around the world.

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Cloud-based delivery companies

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