What Is Financial Technology?

Financial technology is a broad umbrella term for the technologies that enable and improve many different parts of our financial system. This includes everything from payments, savings and investments to mortgages, loans, insurance and more. Fintech applications use a variety of technologies, including blockchain, cryptocurrency, artificial intelligence (AI), machine learning and more.

When it comes to payment systems, FinTech has enabled new mobile payments and digital wallets. It has also made it possible for small businesses to seek capital through crowdfunding platforms, or for individuals to fund their dreams with a loan from a peer-to-peer lender. FinTech has even helped people save money on their mortgage by connecting them with better rates through a company like Better Mortgage, or saved them thousands of dollars in fees and interest with online discount brokers.

The most talked about fintechs share one common trait – they aim to challenge, and ultimately replace, traditional financial services companies by being more nimble, offering solutions that cater to an underserved market or providing faster or better service. This has led to the creation of a number of distinct subcategories within fintech:

While these technologies differ in how they accomplish their goals, all fintechs are helping to disaggregate a traditionally consolidated industry that was once protected by high levels of regulation. For example, robo-advisors use AI to create investment portfolios that match the unique risk profiles of individual investors, with minimal or no human intervention. Meanwhile, blockchain compresses the issuance of title deeds, home sales, car purchases and international money transfers into a single step, often taking seconds rather than days.

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