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Familiarizing Yourself with Fintech

If you don’t know what the word “fintech” means and what it entails, you’re not alone. However, the truth is you’re probably a lot more familiar with it than you think. Besides the funny name (“financial” and “technology” joined together), fintech is innovation that, simply put, applies new technology to improve financial activities. Fintech aims to compete with traditional financial methods in the delivery of services with the ultimate goal of reducing the costs associated with performing transactions. In a sense, it’s disrupting the way traditional banking is conducted.

Born out of consumer necessity, fintech companies work by leveraging new technologies to create better financial services for people and businesses alike. “Without fintech, the payments industry would still be a paper-based industry. Cash is easy. Technology is hard. But fintech is what pushes the industry forward, allowing us to move away from cash-based transactions,” according to Jason Holderness, Chief Technology Officer at LOLA POS..

The boom of the fintech “industry” as a whole, can most likely be attributed to the significant demographic shifts taking place in the population as more people are looking for increased convenience, better efficiency, and speed. Consumers want to conduct transactions via mobile technology platforms and applications, and they’re also looking for ways to streamline processes.

Payments and Fintech

As Business Insider reported at the end of 2016, the payments segment of fintech is much more mature than other areas and a small handful of companies now dominate the space. For example, PayPal is the undisputed leader in digital payments in Europe and the U.S., while Apple Pay and Android Pay have taken over the top spots for in-store mobile payments. In China, Alipay and WeChat are the most popular of the digital payment methods.

Highlighting the increasing popularity of digital payments, the average person with a smartphone or similar mobile device already uses between one and three apps just to manage their finances. Fintech and the companies behind it are responsible for these apps, making it possible for consumers to have access to accounts and perform transactions more easily and efficiently than ever before.

With the changing financial landscape, many newer retail banks are actually foregoing brick-and-mortar branches and standard ATM networks in favor of services delivered exclusively online and through apps. Digital-only banks like Ally (launched in the U.S. in 2008), have entered the market in the last few years and that trend seems to be picking up steam because not only do they provide a convenience factor for consumers but they can also offer them better rates, lower fees, and accounts tailored to individual needs.

The Future of Fintech

Much of fintech’s future will depend not only on the technology behind it, but on the investments made to support it. For now, it looks like the industry is in good shape as funding continues to grow. After hitting $19 billion in total global funding in 2015, $15 billion was already reached by mid-August of 2016. Fintech funding surged throughout 2016 thanks in large part to tremendous funding rounds by Chinese fintech businesses that attracted investments from the U.S., Europe, and countries of the Asia-Pacific region.

Holderness believes that improving speed and ease of use is ultimately at the core of fintech’s future: “The current challenge with electronic payments is the slowness of moving money from one person to another. The exchange of cash, for example, is an instantaneous transfer of money from one person to another. It’s easy and quick. Venmo, for instance, took on the challenge of replacing quick and easy cash transactions between friends, and it has shown tremendous success.”

Growth and expansion is expected for the indefinite future, especially in the mobile payment department as the industry matures. On the business front, an increasing number of small retailers are looking for faster access to the money they’ve earned through electronic transactions. If banks and financial institutions don’t create the technology for that to happen, someone from outside the payments industry will most likely step in and create a solution for these merchants.

As the world increasingly goes mobile as well as cash-less, fintech has adapted quite nicely and it appears that it will continue to do so.

LOLA POS. works with several major players in fintech and provides merchants and agents alike with the latest information available in this ever-changing industry. Contact LOLA POS today to learn how the latest advancements made in fintech can make it faster and easier to process payments!

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