Financial Technology

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How is Inflation Impacting Fintech

How is Inflation Impacting Fintech?

More consumers are choosing online fintech over traditional banks and credit unions regarding financial management. The decline in the value of fintech stocks over the past year has been quite steep. This sector includes companies such as digital payments and insurance firms. According to Forbes, a little over 10% of consumers pay for the services of these providers. Most consumers pay for the services of fintechs through monthly subscriptions or membership fees. A third of those aged 21 to 55 subscribe to these services, while only half spend more than $10 a month. Despite the recent market turbulence, driven primarily by runaway inflation and rising interest rates, the decline in the value of financial technology stocks has been considered mild by market observers. However, analysts believe that the sector’s slump is a necessary step to improve the industry’s stability.

The term financial technology refers to various ways financial firms can improve the efficiency and accessibility of their operations by using software. These businesses typically use that technology to automate or adapt traditional financial services. Neobanks are online banks not based on physical branches. Instead, they offer a wide range of financial services through their online platforms. These nonbank neobanks do not have the same broad range of offerings as their traditional counterparts. Many of the founders of financial technology companies are not bankers; instead, they tend to focus on the user experience of their platforms. Most do not have a deep understanding of the financial services industry. One of the main factors that contribute to the profitability of these firms is the transaction fees that they receive when customers use their services. Financial technology’s rapid emergence and evolution has created new opportunities for banks and other financial firms. These businesses are constantly looking for new ways to improve their operations and meet the needs of their customers. Due to this innovation, traditional banks are forced to rethink their approach to operating.

According to a study conducted by Simon-Kucher, the world’s neobanks have a combined population of over 400. Out of the top 25 firms, only two have managed to achieve profitability. These firms typically make less than $30 a customer. The study also noted that the number of neobanks globally has increased over the years. Out of the 400 or so neobanks currently operating, it is predicted that around 300 will not be here for long. The value of financial technology stocks has been declining steadily over the past couple of years. As of 2022, fintech stocks are down around 25% from their peak, underperforming the Nasdaq-100, down more than 26% year-to-date. Financial technology’s rapid emergence and evolution has created new opportunities for banks and other financial firms. However, the flood of new financial technology companies backed by SPACs has all but evaporated. Leaders such as PayPal Holdings, Block Inc., and Robinhood Markets have lost more than 60% of their value since October 2021. One of the main factors that prevent financial technology firms from turning a profit is the vast amount of money they give to their customers. The key to profitability for these firms is to move away from being free and toward being fee-based. The potential of financial technology companies in traditional financial institutions is immense, considering the various sizes of financial institutions in the industry. Aside from being fee-based, financial technology firms can also benefit from the advantages of being backed by banks. With the ability to offer high-interest deposits, traditional banks can compete on a scale most neobanks cannot.

What To Look For In Fintech In 2022

What to Look for in Fintech in 2022

Fintech has developed and expanded increasingly over the last decade, with firms leveraging technology, innovations, big data, and analytics. These developments are far from the last we’ll see in the financial sector; as new developments arise, everything that involves finance will be impacted by fintech. Here are some fintech trends to keep in mind as we draw closer to 2022.

 

Banking

 

Society is steadily leaning towards becoming cashless, and digital-only banks lend to this growing trend. Fewer people have physically needed to go to a bank and handle their financial issues, resulting in fewer lines and no physical cash to hold. Current online banks, such as the UK-based Monzo, Revolut, and Starling, have seen rapidly growing customer bases that force existing banks to rethink the focus on mobile apps. Fintech improvements continue to shift the banking industry, which has forced banks to close branches as a result. 

 

As customers continue to say they plan on converting to digital-only banking, it’s no surprise that a quarter of all bank branches are expected to close within the next three years.

 

On the other hand, open banking pledges to deliver more competitive financial services to both individuals and businesses. This banking method connects banks, third parties, and technology providers, consensually sharing customer data with authorised providers.

 

Blockchain

 

As digital ledger technologies continue to advance and interest in cryptocurrency grows, blockchain technology will continue to open opportunities to fintech companies. According to PWC, worldwide economies are expected to adopt blockchain technology at scale by 2025. Blockchain continues to disrupt the payment industry, with many people expecting it to become apparent in both the financial sector and, specifically, fintech. This technology enables secure payments and transactions for all who use it while removing the middleman, therefore reducing costs by a large percentage. Presently, cryptocurrencies have successfully used blockchain technology and are prepared to be incorporated into financial institutions, applying them to traditional banking operations.

 

Financial Literacy

 

Fintech also provides a way to improve people’s financial literacy, allowing customers access to easy-to-understand financial information so they can make sensible decisions about their personal finances. Not all people, for example, understand the importance of budgeting; not all people are completely informed of the details when making spending decisions. Fintech uses data accessible through open banking to inform customers about the best available choices for them. The hope is to continue educating people in financial literacy throughout 2022 so that everyone can make smart financial decisions.

How Has Fintech Impacted Different Industries

How Has Fintech Impacted Different Industries?

Fintech has spread massively over the years, to the point where it impacts more than just the financial industry. Thanks to the development of fintech, two types of products were created for the benefit of others: B2B and B2C. The first type, B2B, offers different financial services through fintech apps, while the second type, B2C, offers apps that are user-oriented for clients. The B2C model, specifically, was created to compete with financial service providers. 

 

From mobile apps to trading areas, fintech projects vary immensely and allow entrepreneurs to get their money without having to visit the bank. Here are a few industries that fintech has impacted over the years.

 

Funds Transfer

 

Transferring funds used to be slow and expensive. If you wanted to transfer money, you really had to think about when you would do it and when you needed the money transferred by if you wanted to get it done in time. However, with fintech, the funds transfer field started to develop; according to Think with Google, 69% of smartphone users transfer money using a mobile app rather than a website. Plenty of online services exist for money transfers, such as TransferWise. These services give small companies and private users the chance to send money to others at a lower price. 

 

Loans

 

Since many people have credit cards with certain payment limits, it’s possible to take out a loan online. Web and mobile applications such as KreditBee and MobiKwik allow people to use their sites and take out a loan quickly; users can usually apply and be approved for a loan in fifteen minutes. Once approved, the whole sum of the loan can be transferred to any banking card within an hour, and users can access their personal information (balances, arrears, etc.) quickly and easily. It’s no longer necessary to stand in lines and sign physical documents to get a loan; this trend could completely replace habitual crediting.

 

Chatbots

 

Chatbots are artificially intelligent bots that can, among other things, help improve the financial process. They can send notifications about changes to whoever is listed, provide helpful information to users, and more. Due to this, chatbots have increased user loyalty, which increases a business’s profit and makes a product more competitive. Several banks globally already use chatbots and have seen these results, using them to notify clients, help clients pay their bills, and so on. Some, like MasterCard, even have a chatbot for Facebook Messenger to improve digital services.

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FinTech 101: What is a Green Bank?

What Is a Green Bank?
You may have heard the term “Green Bank” and wondered what it meant. This short article will explain the term and concept behind it.

Green Banks in a Nutshell
A green bank is a bank that exists for the sole purpose of battling earth climate change by funding projects that may be able to decrease the global carbon emissions and increase the use of alternative and renewable fuels and energy. They tend to support infrastructure spending in wind, solar, and other renewable energy space.

Green Banks: Functional Model
Green banks are not climate charities. Their funding is expected to be paid back with a profit for the bank. Currently, they are supported by some states in the U.S. and also by private funding. Green Banks utilize philanthropic and public funds. They generally fund energy projects that beyond the research stage and “good to go”. The Coalition for Green Capital (CGC) is a nonprofit agency that is deeply involved in advocating for green banks’ continued development.

Where Did the Idea for Green Banks Originate?
The idea for green banks started in 2008 when two entrepreneurial-minded, Ken Berlin and Reed Hundt, came up with the concept as part of the Obama transition team’s plans for promoting cleaner energy changes in US society. A proposal to enact federally supported green banks was attached to the American Clean Energy and Security Act. The concept never made it as legislation at the federal level. Green bank supporters were not daunted. Consequently, green bank advocates persuaded some states to take up the cause.

Green Banks: Some Statics
Currently, there are at least ten states that have at least one green bank. In addition, they are in the early stages of catching on globally as well. They also exist in Australia, the United Kingdom, and Malaysia. Within the U.S., green banks have already been involved in the funneling of some $3 billion in funds for clean-energy projects.

Green Banks: Their Future Development
With the advent of the Biden presidency, green banks may again find a firmer footing at the federal level. Indeed, in December 2020, Mr. Biden proposed the idea of a national green bank. They appear sure to gain more traction internationally as the desire to dampen climate change takes hold.

How To Forge A Career In Fintech - Jacob Parker -Bowles

How to Forge a Career in Fintech

Fintech companies offer innovative solutions to financial problems. They help banks to improve their customer service and be more flexible. Due to the growing popularity of the fintech industry, their jobs can be very rewarding. But what does it take to forge a career in fintech?

Start Small, Learn and Grow

Fintech is a booming industry, meaning that there’s more to be discovered. As a result, there’s a lot of opportunities in this industry. It helps to get into the industry with some experience in the financial sector.

However, it’s not necessary. A person with a law degree can learn on the job and become an expert in no time. Therefore, one shouldn’t procrastinate. If they think this is the industry for them, they should go for it. They can start at the bottom and work their way up.

What’s Fintech All About?

Fintech is an interesting industry because an individual works in two vast industries: technology and finance.

An example of an emerging fintech trend is open banking. Here, the bank allows tech startups to facilitate customer service and transactions through an app. The customer has to consent before using the app. Once the customer agrees, the bank discloses that person’s banking details to the startup.

Any person that works for the bank or startup is already involved in the fintech industry. That’s how easily one can find themselves working in the fintech industry.

Skills Required

There are three sets of skills that are important in the fintech industry: software and hardware engineering, finance, and communication.

A person with coding skills can work in the product development department. Their work will be to code programs or applications that can be used to improve the financial sector. The person with finance skills helps the coders comprehend what the app is supposed to do. The person with communication skills will help to monetize the fintech solution.

Finally, the fintech industry can be very demanding. If one wants to succeed, one has to consider work and personal life. They have to be in perfect balance. Too much work can leave a person feeling exhausted and unmotivated. Therefore, it’s always good to think about one’s health and happiness.

Benefits Of Fintech For Small Companies Jacob Parker Bowles

Benefits of FinTech for Small Companies

Financial technology, known as FinTech, is changing the way many small business owners run their companies. Struggling to find financing from lenders and strict regulatory compliance is leading many smaller companies to focus on FinTech. Instead of relying on traditional lenders to help support their companies, many entrepreneurs are now turning to affordable solutions from financial technology companies.

 

FinTech Product and Service Offerings

FinTech companies offer a range of solutions for small companies. Business owners have access to lending, foreign exchange services, and digital business solutions. Many finance experts agree that the rise of FinTech is not just a passing fancy, but a real shift in the way small business owners generate revenues and profit. A report from the World Economic Forum suggests that FinTech will change the entire business environment.

From invoicing solutions, peer to peer lending, and supply chain financing, FinTech companies are gaining a real market presence in the business world with their low-cost solutions. Additionally, these companies are not hamstrung by the regulations that many traditional banks face.

One of the largest gaps FinTech companies fill is lending solutions. Traditional banks often turn away small business owners seeking smaller loans. By offering so-called “micro-loans,” FinTech companies provide a critical lending solution for smaller companies that need less than $50,000. The Small Business Administration considers any loans of $50,000 or less as “micro-loans.”

Many FinTech companies also offer strategic invoicing and expense solutions. In many cases, small business owners have free access to these solutions using easy to download apps.

 

Other FinTech Solutions

Lending and tracking invoices are only two of a countless array of solutions offered by FinTech companies. Property management companies can accept payments from tenants using the solutions. Additionally, loans are available to help some of the costs of repairs and security deposits that many residents struggle with while property management companies still receive those funds upfront.

 

Many experts agree that FinTech for smaller companies is still in its infancy. Adopting FinTech as the primary source of business solutions for entrepreneurs is still a challenge. However, many experts do agree that FinTech companies have found a niche by providing services to smaller companies that largely go unrecognized by bigger banks.

Jacob Parker Bowles Fintech Around The World

Fintech Around the World

Fintech, short for financial technology, is a commonplace term in first world economies such as those of the United States and Europe. Even if you don’t work in the finance sector, you are probably familiar with it. It makes its way into the news all the time with hyperbolic speculation about how fintech will be the ultimate disruptor of traditional banking, overturning archaic legacy systems. It’s true that financial technologies have shaken up traditional financial markets to a certain extent, but exactly how much and in what ways varies across the globe.

To get a sense of how much the fintech sector is disrupting markets, we should look at stock investments in the major fintech markets around the world, on both a macro and micro scale. Overall, fintech has taken the world by storm. According to statistics collected from the 2017 FinTech Adoption Index, the average adoption rate of fintech products around the world is 33 percent- up from 15 percent in 2015. Even in emerging markets such as India, Brazil, China, Mexico, and South Africa, the adoption rate is about 50 percent. Fintech funding around the world totaled $49.7 billion between 2010 and 2015, and $25.8 billion in 2016 alone. As of 2016, there were approximately 1,400 fintech companies throughout 54 countries.

In the macrocosm, it is clear that fintech is a dominant and growing force, but to understand its impact on a deeper level, one should examine regional trends. Here is how the fintech sector plays out across European, U.S., and Asian markets, based on recent data from GP Bullhound and CB Insights.

United States

The United States is a hotspot for fintech activity, representing nearly half (46%) of all global fintech startups valued at $1 billion or more (or unicorns, in finance speak). The United States exhibits a fairly consistent trend over recent quarters where the volume of fintech deals being made is decreasing while the amounts are increasing. The reason for this trend can be attributed to a shift toward large-scale private investments, which could affect the supply of venture capital funding to other startups.

Europe

Fintech investments in European markets, in contrast to the purely capitalist United States, tend to be smaller and more regulated. Only one European fintech investment as of the second quarter of 2017 exceeded $50 million in value. Although the volume and value of investments have decreased since the first quarter of the year, investments follow a pattern according to the European financial year, whereby investors seeks to capitalize on early-stage fintech startups before the end of the fiscal year. Additionally, traditional banking models in the UK are starting to give way to technology-driven ones, as can be seen in ClearBank, the first UK clearing bank built on cloud technology rather than legacy systems.

Asia

The Asian fintech market has experienced rapid growth in the second quarter of the 2017 fiscal year, with deal value and volume both experiencing five-quarter highs. The reason for the spike in Asian fintech markets can be explained by huge investments in financial technologies alongside traditional financial institutions. Rather than disrupting traditional institutions, fintech businesses in Asia tend to supplement the existing infrastructure.

It’s easy to make generalizations about fintech and the effect it has on traditional financial markets around the world, but when we take a step back and examine how it plays out across key markets, it becomes apparent that fintech has a long way to go before it becomes the ultimate disrupter of financial markets people speculate. For now, it exists within a highly volatile market where traditional systems such as legacy banks continue to exist alongside fintech startups, many of them gradually morphing their financial offerings.

Jacob Parker Bowles: The Shifting Paradigm Of Venture Capitalists And Fintech

The Shifting Paradigm of Venture Capitalists and Financial Technology

Several years ago, before fintech (financial technology) became a household name and widely accepted form of banking and finance management, venture capital firms specializing in this area did not exist. In recent years, however, fintech has become one of the fastest-growing areas for venture capitalists.

Venture capitalists invest in companies that they believe to have large growth potential, so it is no surprise that so many venture capitalists have chosen to funnel their funding into fintech startups- the industry is worth nearly $900 billion, comprising over 1,000 companies and $105 billion in funding. According to VB Profiles’ Fintech landscape report, outside funding for fintech companies more than doubled between 2014 and 2015, from $17.8 billion to more than $38 billion.

With all that growth in the past few years, it seems that it would have to plateau at some point, and as recent trends suggest, that just may be the case, with financial technology experiencing a paradigm shift. In 2016, global venture capital investment dropped off to $25 billion from $47 billion in 2015.

So what gives? Venture capitalists are not losing faith in startups, but they’ve had a sort of reality check. According the Morgan Stanley, “Pullback in fintech investment over the past year is indicative of a realization of lower return on investments than initially hoped due to some unique challenges to disrupting in the financials industry, and our suspicion is that VC investors will continue to scale back investment.”

As venture capitalists step back, legacy firms step in. A fear of disruption can be attributed to the reason traditional financial firms are now hopping on the fintech bandwagon. The threat of disruption from fintechs is forcing incumbents to up their investments in technology to gain operating efficiencies and preserve market share,” Morgan Stanley explains.The proposed deregulation of Wall Street from the Trump administration is another factor. Deregulation would free up incumbent firms’ spending as they wouldn’t have to put out as much money for regulatory compliance and would have more to invest in fintech startups.

This shift in investment patterns is unlikely to have a direct, adverse effect on fintech startups. What is likely, though, is that established Wall Street firms will gain a competitive edge with fintech companies, putting them on a more level playing field as they adapt new technologies to improve their business models.

5 Top Fintech Companies Jacob Parker Bowles

5 Top FinTech Companies

Fintech is, as its name alludes, a field that combines both finance and technology. The companies that fall under the fintech category often specialize in account management, lending, financing, financial assets and capital markets. However, fintech’s main point of attraction for businesses large and small is its dedication to meeting customers’ needs.

Unsurprisingly, the fintech industry is booming, with at least a dozen new companies reaching unprecedented success shortly after their inception.

With that in mind, let us take a closer look at the top fintech companies around the globe:

Adyen

Founded in 2006, this Netherlands-based company provides its clients with the ability to accept payments from around the globe with a single platform. Since it expanded its software to accept payments from online and mobile orders, Adyen has seen an influx of high-profile clients — namely, Facebook, Netflix, Uber, L’Oreal, Burberry, and Microsoft. Because of this spike in popularity, the company nearly doubled its revenue to $700 million in 2016.

Klarna

Headquartered in Stockholm, Sweden, Klarna is focused on improving the online shopping experience via an optimized checkout system. Since the company got its beginning in 2005, it has served over 45 million end customers and added big names such as Disney, Spotify, and Samsung to its list of clients. At the end of 2016, Klarna was valued at over $42 billion.

Avant

Founded in 2012, Avant is an online lending platform that is dedicated to lowering the barriers consumers face in borrowing money. Although this United-States-based company does not necessarily have any high-profile clients, it has reached over 500,000 customers and accrued a loan portfolio that is worth over $3.5 billion — an impressive feat for such a young company.

Oscar

Founded in 2013, this innovative company has taken the customer service aspects of fintech and applied them to the health insurance industry. Oscar’s goal is to encourage uninsured Americans to purchase policies by quickening the application and approval process, and providing access to full-coverage plans that boast affordable premiums. In addition to its admirable mission statement, Oscar also boasts a prominent list of investors that includes Google Capital, Fidelity, and Khosla Ventures.

SoFi

Launched in 2011 by four Stanford business students, this San Francisco-based fintech startup promises to be “a new kind of finance company.” Clearly, SoFi’s unconventional approach to lending and wealth management has been successful, as the company now boasts over $19 billion in funded loans and over 300,000 members across the country.

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How Retailers Are Retaining Relevancy

It’s not hard to spot the decline in brick-and-mortar stores. If you were alive in the 90s, you probably remember lounging with a book and listening to the CDs in Borders, testing out the gadgets in Sharper Image, checking out the flat-screen TVs at H.H. Gregg, picking out your next VHS for movie night at Blockbuster, and trying on sneakers at Sports Authority. None of these stores exist today. Even shopping malls are gradually becoming obsolete, with many closing a vast majority of their retail stores and becoming these cavernous, eerie ghost towns.

As more and more retail stores switch to e-commerce only or become acquired by other retailers, the ones left standing will have to get creative and come up with ways to retain their relevance in a tech-dominated world where 79 percent of U.S. consumers shopping online and 42 percent ranking convenience as an important factor for shopping online versus traveling to a store, according to a study from Pew Research. Online shopping grew at a rate of 12% year-over-year since 2009 compared to 4.5% for retail sales according to the U.S. Census Bureau’s monthly retail report.

When technology is the name of the game, the most logical thing retailers could do is utilize it to appeal to a tech-driven society- and that is exactly what some retailers are starting to do. According to leading technology research and consulting firm, Gartner, “traditional stores will have a place in the future with a new model that will blend the digital with the physical.” Enter, artificial intelligence (AI).

Artificial intelligence is the use of machines to perform tasks that normally require human intelligence. AI has both amazing potential and also some concerning implications- if we continue to outsource human tasks to robots, will we reach a day when there is no longer the need for human labor? Thankfully, that day has not yet arrived, and maybe it never well. AI is just starting to manifest in the form of personal assistants like Amazon Echo and Google Home.

One of the ways brick-and-mortar retailers are competing with online retail is by collecting customer data through video surveillance. Online vendors have always had an advantage over physical retailers in combatting cybercrime in that they store all of their customers’ data. Now, facial recognition technology and floor-level cameras allow retailers to predict the age and gender of customers and even analyze customer reactions to products. Retailers like Walmart and IBM are already implementing this technology.

Another way retailers are employing data and AI to stay on the cutting edge is through in-store help. Target plans to equip all associates with technology that will enable them to deliver superior customer service by searching inventory across the company, setting up shipping, and taking payment from the customer mobly. Lowes is taking it one step further by launching robots to assist customers on the floor, keep track of inventory, and analyze shopping patterns.

A final way retailers can take advantage of AI is by leveraging the internet to obtain key data about customers and make their shopping experience more personalized. By monitoring trends among shoppers, retailers will have a better idea of what to sell and how to attract customers.

Technology ultimately encroaches upon every corner of human life, albeit at a slower place in some parts of the world, and it is the difference between institutions that succeed and those that fail.

 

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