These days, traditional banks and financial services companies have a lot of competition. Innovative companies in the financial technology industry are transforming many categories of the financial services market. As a CIO, you need to be familiar with the many categories of financial technology. With this knowledge, you can stay on top of trends and hire the IT professionals you need to stay competitive.
Here are some of the major categories in the financial technology market.
Financial technology companies are changing the lending process. People don’t need to turn to banks or credit unions to borrow money anymore. Many FinTech companies are now making loans directly to consumers.
Consumers can request loans online and get approval quickly.
Payments are another category of the financial technology market. Companies in this category let people send money to each other without needing to turn to banks. Banks tend to charge exorbitant fees for simple payments like peer-to-peer transfers.
FinTech companies let consumers send money quickly and cost effectively. Technologies like blockchain are making it possible for these companies to process payments more cost effectively than banks can.
International Money Transfers
Traditionally, internal money transfers have been very expensive. Banks and traditional money transfer companies charge up to eight percent in fees. For large money transfers, these fees add up quickly. Worse, traditional transfers are slow.
Financial technology companies in this category are offering faster, less expensive international money transfers. Ripple, a company in this category, can send international money transfers in eight seconds, according to Financial Post.
Personal finance is another major category of the financial technology market. In the past, people needed to talk to financial advisors at banks to get personal finance advice. To budget, they needed to use spreadsheets or an envelope system.
Now, there are plenty of apps on the market that can offer advice and help with budgeting. Consumers can get personal finance advice anywhere, at any time. Companies like Mint help consumers create budgets, while Level Money helps consumers save. There are also FinTech companies providing retirement or investment advice.
Financial technology companies are transforming equity financing, too. Companies in this category of the FinTech market are making it easy for businesses to raise money. Some companies work to connect accredited investors with vetted startups. Others use a crowdfunding model and let anyone invest in new businesses.
These companies simplify the fundraising process for businesses. Virtual fundraising is also easier for investors, since everything can be done online.
Consumer banking is another category of the financial technology market. Traditional banks charge high fees, so companies in this category present an alternative for consumers.
These companies also have the opportunity to reach underbanked consumers. Consumers who can’t get approved for a credit card—or don’t want one—can get prepaid cards from FinTech companies. Companies like Green Dot and Netspend are active in this category. Some companies, like Moven, provide digital banking services. Consumers can use digital bank accounts instead of using a traditional bank.
Financial technology companies have recently branched out into the insurance market, too. Many companies in this category are focusing on distribution. They’re using new technologies like apps to reach customers that are underserved by insurance. They’re also more flexible than traditional insurers.
For example, people who want to borrow a friend’s car can buy car insurance for just a few hours. Since the insurance market is highly regulated, companies in this category tend to partner with traditional insurance companies.