Fintech – An Emerging Industry Is Here to Stay

An infographic that explains what Fintech is, the technologies that drive it, its users, its advantages and its impact on the future.

Fintech, short for financial technology, is a big part of your professional and personal life, even if you don’t realize it. If you have ever paid an order online, have used apps like Venmo or Paypal, or enjoyed the convenience of automated invoicing in your business, you have already used Fintech.

Like many other emerging sectors, it is often difficult to understand what Fintech all encompasses. Especially since the sheer number of services, tools, and platforms that all fall under this category seems to keep expanding. This guide will explain what Fintech is, its main technologies behind it, and its most common applications. In addition, it will go over the pros and cons and Fintech’s future.

Fintech History

During the last decade or so, Fintech companies have disrupted and revolutionized the financial industry. Then, people had to visit the bank for all their financial transactions, such as getting a mortgage, transferring money, etc. Today, Fintech enables almost any financial activity without visiting a brick-and-mortar financial institution. So, although many people believe that it is a relatively new phenomenon, it has actually been around for a long time.

Fintech is a term used to describe an advanced technology that helps enhance and automate the delivery of financial services. For that reason, it can be traced back to the 1950s when it first introduced credit cards. After that, Fintech quickly evolved in many different areas. For example, ATMs enabled customers to get cash quickly, and electronic stock exchanges such as the Nasdaq changed the stock markets forever. Then, in the 1980s and 90s, financial technology really took off with the introduction of mainframe computers and the beginning of online banking.

Digitalization of transactions in the financial sector became the norm, and in the late 90s, more Fintech companies entered the market. Companies like Paypal were top-rated alongside the “traditional” banking institutions. The global financial crisis of 2008 changed everything. The mortgage meltdown resulted in people distrusting the “traditional” system, and, therefore, many younger people got interested in new Fintech companies. Applications such as payment apps on phones and bitcoin started today’s fintech revolution. Then, smartphones sped up their growth even more.

Fintech has definitely disrupted the traditional banking and financial industries. Now people are excited about being active in industries like banking, stock trading, insurance as opposed to just being passive consumers. They trade stock, manage their money, buy mortgages and insurance. Many people even buy cryptocurrencies.

What Is Fintech?

Fintech is a broad and rapidly growing industry helping businesses as well as customers better manage their financials. Initially, Fintech mainly focused on technology applied to the back-end systems of financial institutions. However, it has expanded and now covers many innovative applications to improve and speed up financial processes for personal and commercial use.

Today, financial technology enables companies to access their finances all the time, so they don’t need to wait and rely on their traditional bank to open and perform their financial operations. In addition, they use data science and blockchain technology to improve and secure their financial activities.

Consumers also save valuable time using these new technologies because they can now cash their checks, transfer money, and manage their investments at any time. Another big advantage is that typically it is free or at a very low cost.

However, as these fintech innovations involve lots of money, regulations are implemented to protect fintech users. Typically, already existing laws regulating banking also govern what you do with Fintech. Unfortunately, they are not always up to speed with the technology and are often subject to fraud and hackers. Rules and regulations imposed by the state and federal governments are changing to protect consumers, and financial institutions and Fintech companies should make sure their platforms meet these regulations.

It encompasses so many different fields that it is important to understand what technologies drive this changing environment.

Main Technologies Behind Fintech

Fintech companies use various technologies. Here is an explanation of a few that are having the biggest impact so far.

Artificial Intelligence and Machine Learning

Artificial Intelligence (AI) is a simulation of human intelligence processes by machines, typically computers. It has been around for years now and is used efficiently in many Fintech applications. For example, banking solutions use AI for analytics and modeling techniques. When combined with big data, Artificial Intelligence can analyze performance, create insight and automate essential processes within the organization.

AI algorithms also provide valuable insight into customer spending habits to allow companies and institutions to understand client requirements better. Machine learning is a key component of Artificial Intelligence. It is used for automated claim processing and risk assessment in the insurance industry, digital financial advising in the finance industry, risk management, and various other applications such as fraud prevention and customer service.


Blockchain is a type of digital ledger technology.  It records transactions in a public, permanent, transparent information block distributed across the entire network of computer systems on the blockchain. When the block is full, it is attached to the previous block, and the chain gets longer. This recording system prevents fraud and makes it (nearly) impossible to hack. Its most common application is as a ledger for financial transactions.

Bitcoin uses blockchain because of its decentralized nature. Its transactions are public, permanent, and irreversible, and there is no need for any third-party intervention to execute transactions.

However, blockchain applications go far beyond Bitcoin and cryptocurrency. This revolutionary technology is also making inroads in many other applications. For example, the secure sharing of medical data, real estate processing platform, and personal identity security.

Big Data and Data Analysis

Big data and data analysis have been key to value generation for the financial services industry. However, big data is only useful after it has been processed. As a result, financial technology companies are finding innovative ways to process this data and apply it to various financial activities. For example, big data analysis helps analyze customer spending habits, improve marketing strategies, and improve fraud detection. In addition, The investment industry enables Fintech to predict market changes and client behavior and apply that information to the creation of new portfolios and strategies.

Robotic Process Automation

RPA is a software solution that automates repetitive tasks. The finance sector uses RPAin combination with Artificial Intelligence to create Intelligent Automation. Such technology helps process information more efficiently and accurately. Examples of Intelligent Automation are widespread in lending, risk management, account management, and compliance. Online mortgage approvals, automated credit checks, and seamless customer onboarding are just some of Fintech’s accomplishments.

Fintech’s Applications

Fintech innovation and applications are plentiful and are adopted by consumers, companies, institutions, and even the Federal Government. Here are some of its most common uses.

An infographic that shows the most common applications of fintech.

Mobile Banking

Mobile banking is one of the most important applications of Fintech as consumers increasingly demand quick access to their money, particularly on their mobile devices. Users can now pretty much do any financial transaction on their mobile banking app without physically visiting a bank. For example, consumers can transfer money, deposit a check, order foreign currency, and make a wire transfer through their app. Moreover, such transactions and activities are generally processed instantly.

In recent years, online banks, such as Chime and Ally, have emerged to compete with traditional brick-and-mortar banks. Online banks offer mobile banking services without physical branches. These banks require customers to be somewhat comfortable with technology, but they also provide customer service to help users resolve issues. Online banks are becoming increasingly popular as they offer products with attractive interest rates and low to zero fees because their overhead costs are low.

Digital Payments

Digital payments are the future. Individuals have already been using digital payment apps like Venmo and PayPal for a long time. However, during the Covid 19 pandemic, digital payments have become even more common and are sometimes the only way you can pay.

Contactless payments have become a preferred payment method during the pandemic. Waving your smartphone across a reader has become a popular way to buy a cup of coffee. Thus, platforms such as Apple Pay and Samsung Pay are prime examples of contactless payment providers. In addition, mobile wallets have also become increasingly popular. A mobile wallet is an application that mimics an actual wallet. It lets you transfer money, receive money, and store money. It even lets you pay bills and buy things. Google and Apple both offer mobile wallets.

Still, more recently, traditional financial institutions have started to follow suit by partnering with tech companies to offer digital payment options.

Crowdfunding Platforms

Crowdfunding platforms are a great way to raise small individual investments from a large number of people. These platforms allow other businesses and individuals to pool funding from many different investors in a single location to fund a specific project or cause. This is very different from getting ‘traditional’ funding from your family, Angel or Venture Capital (VC) investors.

There is a large number of crowdfunding platforms to choose from. Some of the more popular ones are Kickstarter, GoFundMe, and Fundable.

Cryptocurrency and Blockchain

The most significant examples of Fintech are cryptocurrency and blockchain. These two financial technology applications have taken the investment world by storm in the past decade.

Cryptocurrency refers to digital currencies used to buy goods and services while using a permanent online ledger. In addition, it uses encryption techniques to verify each transaction and control the creation of the cryptocurrency. Cryptocurrency exchanges connect users to trade digital currencies such as Bitcoin (BTC), Ethereum (ETC), and other digital currencies.

While Bitcoin is an example of a cryptocurrency, Blockchain is the secure decentralized ledger that helps reduce fraud and keeps transaction records in this peer-to-peer network. Blockchain was actually invented to service Bitcoin. Although it is mostly used for cryptocurrency, blockchain technology has further groundbreaking applications in the financial services industry.

Investment Management  – Robo Advisors and Stock Trading Apps

Robo advisors have disrupted the portfolio management industry with increased efficiency and reduced costs from algorithm-based investment recommendations. They are automated financial advisers that provide online investment management services with almost no human contact.

With the development of technology that automatically analyzes portfolio options regularly, even the traditional large investment management institutions have started offering online Robo-advising services. Companies that offer Robo-advising services include Vanguard, Betterment, and others. Even Goldman Sachs, a company that used to only service clients with more than $10 million to invest, has entered the Robo-advising market. It now offers a Robo-advising service to the public called Marcus Invest, that uses the same algorithms it used to offer exclusively to its wealthy clients.

Another Fintech innovation is the introduction of stock trading apps. In the past, investors hired a brokerage to buy and sell equities. Now anyone can trade stocks right from their mobile device or computer. There are several easy-to-use apps designed to facilitate mobile trading for optimum convenience. Some companies that offer mobile trading apps are Robinhood and TD Ameritrade.


Although financial technology innovation has improved the traditional financial services industry and has created a whole new world of digital online financial services, it has not done so without risk. Data protection and security are the main concerns for the Fintech industry and its customers. The industry really has to step it up to protect its customers from the increasing number of malware attacks, hacks, digital identity risks, and phishing scams that have become major problems.

Cybersecurity is the practice of protecting computer systems, networks, devices, and programs from a cyber attack. However, keeping up with Fintech innovations and their security trends is a massive task. Businesses and federal governments are working hard to figure out how to protect data and prevent these cyber attacks. It is crucial that they find solutions for these serious problems soon. Otherwise, the Fintech revolution will slow down, and its future will be questionable.

Open Banking

Open banking is a system in which banks open up their application programming interfaces (APIs) to allow third parties to access financial information to develop new services and applications. This increases competition and pressures banks to change their business model. Tjey can eithe improve their services or partner with Fintechs. This is a win-win for customers.

Digital Lending / Credit and Mortgage / Real Estate

Many companies use Fintech to fund small business loans directly and employ transactional data to enable quick decisions about credit and lending. In addition, some clubs apply peer-to-peer lending (P2P) to lend money to each other for new ventures without any involvement of financial institutions.

Such innovations have become possible only through Big Data and data analytics across digital platforms. For example, several examples of Fintech provide free credit reports for advertising their credit cards, loans, and other products to customers.


Due to its continued growth, insurtech is gradually becoming a standalone industry, although, today, it still falls under Fintech. Typically, the insurance industry is very slow at adopting new technology. However, the industry is becoming more innovative and insurance companies are collaborating with start-ups to automate processes and expand their coverage. As a result, the use of AI, machine learning, and big data analysis in insurance products and services are helping the insurance industry become more efficient.

Who Uses Fintech?

Fintech users can be categorized into 3 groups:

Business-to-Business – Fintech tools aim to help businesses work together to serve each other more efficiently. An example is how Fintech has disrupted the credit management industry. Before the advent of Fintech, businesses used to be required to go to banks and other financial institutions to get their money and apply for loans. But as financial technology developed, it has goten a lot easier for businesses to get their loans and financing through mobile technology. Applications, credit checks and approvals can all be completed through mobile technology.

In addition, cloud-based platforms and Customer Relationship Management (CRM) software provide several B2B services to allow companies to interact with financial data to improve their customer service.

Business-to-Consumer – Fintech has several B2C applications designed to help businesses serve their clients better while improving their bottom line. For example, online banking and other applications have disrupted a wide variety of B2C industries. Mobile banking, payment wallets, and budgeting apps are all examples of successful disruptive applications. The biggest group of people using Fintech applications is millenials. They grew up with the internet and are very comfortable managing their finances online.

Consumer-to-Consumer – C2C services help consumers interact with one another. For example, cash applications like Venmo, PayPal, and Apple Pay allow users to transfer money via mobile technology and the internet. Consumers no longer need to exchange cash or checks. Instead they can instantly exchange money without any fees.

Some of the biggest names like Google have revolutionized the financial space by enabling cash attachments to emails. These types of technologies are changing the way we manage our finances while reducing the dependency on hard cash.

Fintech’s Pros and Cons

Here are some of the pros and cons of Fintech:


  • Increases efficiency and productivity
  • Expands availability to more consumers
  • Low cost or no fees for transactions, even free advising services
  • Improves transaction quality and accuracy
  • 24×7 access from mobile devices
  • Quicker approvals (accounts, insurance, etc.)
  • Improves security
  • More convenient (access via smartphones, tablets)
  • Speedier transactions


  • Requires internet access
  • Absence of physical branches
  • Does not provide a reliable track record
  • Learning curve for the older generation

While Fintech companies offer a fast, seamless, affordable banking experience with minimal paperwork and easy accessibilty, they do have limitations. For example, most online banks lack a physical branch which means you cannot access your physical money if something goes wrong with the internet-based system. Therefore, you should make sure your online bank has the support of an ATM network so you can withdraw money when needed.

Another problem with online financial services is the lack of in-person customer service. These services may offer customer support centers, but you may not find online help satisfactory when discussing important issues like life insurance, retirement savings, or child education funding.

Finally, many Fintech startups do not have long-term track records, so there is always a risk that they may not survive in tough economic times.

Although Fintech has some limitations, it is obvious that it is here to stay. Financial technology saves time and money, and enables customers do almost any financial transaction themselves from the comfort of their mobile screens.

Financial Technolgy Unicorns

Fintech unicorns are companies with a value of more than $1 billion. According to Fintechlive, as of June 7, 2021, 188 Fintech unicorns launched in or after 1999 worldwide. In addition, the report highlights the fact that the United States is home to some of the biggest Fintech companies, including Paypal, Square, Stripe, and Coinbase.

List of Fintech unicorns of the 21st century.

In 2020, Fintech funding in the U.S. was likely higher than in 2019. The industry also performed better, even during a challenging economy amidst the pandemic. In Europe, unicorns like Adyen, Revolut, Klarna, and TransferWise, lead the largest Global Fintech startups. Asia also has some Fintech unicorns. Most of them are in China, India, and Hong Kong.

Fintech Regulations

The financial services industry is one of the most regulated sectors. Regulation is the top concern among governments as Fintech’s applications keep expanding. With the integration of technology into financial processes, regulatory problems multiply for the companies. For example, automation and digitization leave systems vulnerable to hackers and threats.

Regulation is also a big problem in the world of cryptocurrencies. Initial coin offerings are often unregulated in many countries and have served as grounds for frauds and scams. As the offerings and industries concerning Fintech are so diverse, it isn’t easy to have a single, comprehensive approach to regulations and problem-solving. For the most part, national governments and other regulators use existing regulations and customize them in some cases to regulate Fintech.

The problem in the U.S is that there is no one regulatory framework that deals with just Fintech. Instead, the regulations that Fintech companies have to adhere to are spread among various regulatory bodies, which makes it complex. In addition, most companies are subject to regulations at the federal and the state level. Here are some of the U.S. regulatory bodies that regulate the Fintech industry: The Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), and the Consumer Financial Protection Bureau (CFPB).

Although US regulators have had a hard time keeping up with the ever-expanding applications of Fintech, they are working hard to simplify the legal framework for Fintech. It is a slow process but necessary for the continued growth of the industry.

Fintech’s Future

As for Fintech’s future, it is difficult to say what innovations will be introduced in the near future. Expansion projections for 2020 and 2021 have only been accurate to some extent. The pandemic-related interest rates cuts and their consequences have rendered the future of Fintech somewhat uncertain. In addition, Fintech has suffered from financial setbacks during the crisis. Still, the demand has been higher than ever before as businesses and customers rely on technology to keep track of their finances.

Some predictions suggest that economic recovery will bring new opportunities for Fintechs, and long-term uptrends for its future will remain intact. Partnerships between banks and Fintechs don’t seem to be slowing down. Furthermore, consumers can expect to see the emergence of companies based on advanced services, including AI, P2P (Peer to Peer) transactions, blockchain, and cryptocurrency.


Fintech is a big player in the business space and global economy with its quickly expanding applications and technologies. This growth is mostly due to the opportunities Fintech offers to small businesses in the same field as large banks and financial institutions.

Moreover, the solutions Fintech companies offer are no longer ‘one size fits all.’ Instead, they offer customized, niche-targeted services to meet specific needs at a more affordable price than those offered by traditional financial providers.

As consumers keep getting more connected and tech-savvy, Fintech companies that continue upgrading to the latest solutions will succeed and keep growing.

Vikram R
Vikram Raghavan is a value investor, technologist, and Finexy co-founder. In addition to stock market investing, Vik also invests and advises startups on growth marketing and product management. Vik's work is focused on themes of marketplaces, micro-entrepreneurship, marketing automation, and user growth. Previously, Vikram led product and growth teams at, focusing on efforts across acquisition, new user experience, churn, and notifications/email. He holds an MBA in Finance from Temple University and a B.S. in Computer Information Systems and Finance from Bemidji State University.