Financial Technology

Fintech is a portmanteau for “financial technology.” It’s a catch-all term for technology used to augment, streamline, digitize or disrupt traditional financial services.

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.

Businesses rely upon fintech for payment processing, e-commerce transactions, accounting and, more recently, help with government-assistance efforts like the Payroll Protection Program (PPP). In the wake of the Covid-19 pandemic, more and more businesses are turning to fintech to accept contactless payments or adopt other tech-fuelled advancements.

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.

The annual Forbes Fintech 50 spotlights the hottest and largest companies in the industry. The 2022 list is topped by Stripe, a decade-old payment processor with a $95 billion valuation. In second place is Klarna, a 16-year-old Swedish firm that offers consumers financing for purchases at many major retailers; it was valued at $46 billion.

Fintech branches off into a number of more granular industries: wealthtech (apps such as Wealthsimple, an online investment management service for Canadians), investtech (like Acorns, which lets users round up purchases to the nearest dollar and invest the difference in a diversified portfolio) and insurtech (such as Next Insurance, a mobile-first carrier). It touches nearly every industry, geographical market and business model.

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.

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. 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.

Forbes