The term Fintech results from the union of the English words Finance and Technology (in Spanish, technological finance), and refers to those companies that provide financial services using the latest in existing digital technology, to offer products and services innovative.
With Fintech companies, the sector has enormous potential to improve financial inclusion, especially in areas such as Latin America, and it is that within the digital ecosystem, Fintech companies occupy a preponderant and very special place since they contribute to stimulating financial development looking to the future. We see that technological innovation has brought with it new trends for the financial sector, among which Fintech businesses stand out. You may be interested in our article entitled What is Core Banking or Core Banking Software?
What do Fintech companies do?
Fintech companies offer solutions or play the role of “intermediaries” in the world of finance in various aspects: money transfers, loans, purchase and sale of securities, financial and investment advice (just to name a few in which Fintech have achieved figuration). Its growth has been vertiginous in recent years, after recent crises (for example, the one that occurred due to the collapse of the investment bank Lehman Brothers), which caused great discontent over the operation of traditional banking, creating a great opportunity for Fintech companies to emerge as new alternatives and to cover that “void” produced by the discredit of traditional banking.
Growth is based above all on the appearance of new technologies through the Internet, which allows the user to have better control of their capital and investments, which is thanks to ICT (Information and Communication Technologies), which are transforming the financial world.
Why are Fintech the future?
Traditional financial services have been characterized by being inefficient, with many obstacles, and costly, however, advances in technology have allowed productive sectors to progress and gradually adjust to new consumer trends. In fact, we see that the financial sector is the one that has been most influenced and conditioned to adapt to new technological alternatives. The Fintech industry is seen as an effective solution since its purpose is to improve financial inclusion at a global level.
The Inter-American Development Bank (IDB) has recognized Fintech as a great alternative and an opportunity that will allow expanding access to the finance sector globally, where there are still many people who are not served by traditional banks (such as is the case in some regions of Latin America).
The importance of improving financial inclusión
Under the basic perspective of the economy, that the population, in general, has adequate access to financial services is crucial and vital for its development, since this allows all citizens to have access to the same opportunities: higher education, business financing or mortgage, safeguarding assets, savings accounts, etc. But to make this a good alternative, it is necessary to have an appropriate regulation that provides facilities for the incorporation of new technologies in addition to providing adequate education on the advantages of these new financial alternatives.
What do you think about this topic? Do you think Fintech companies help financial inclusion?
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