Fintech companies (a word formed with the contraction of the words Finance and Technology) are firms that leverage technology to transform products, services, and traditional financial activity processes. Fintech companies are a nascent business activity in which companies use technology to provide different financial services in an agile, efficient, and reliable way, providing greater comfort to customers and users in general.
Promising future for Fintech
Fintech companies have almost radically changed the traditional finance sector, both at a private and business level. Although its size is still relatively smaller than the traditional banking sector, this sector is expected to grow exponentially shortly.
What do Fintech do?
Fintech companies worldwide are dedicated to serving as intermediaries in the world of finance on several fronts: money transfers, loans, sale and purchase of securities, financial advice, and investments, to name just a few areas in which Fintech are taking off with great force.
Taking advantage of traditional companies
Due to their accelerated growth, Fintech companies are taking advantage of traditional companies, to such an extent that the Santander Group, through its presidency, affirms that it is time to “level” the playing field between traditional banking and the sector. Fintech, referring to the fact that the current regulation favors technology companies since they are lending funds and do not comply with certain banking regulations.
The aforementioned group poses three challenges for regulators: new guidelines to get the bank to finance more companies, a transition to make the finance industry more environmentally friendly, and address the digital revolution.
What’s going on?
Nowadays, large technology companies have become loan platforms without the obligation to comply with many regulations that traditional banking does strictly comply with. Last year, between Fintech and Bigtech, they granted credits for more than 795,000 billion dollars worldwide; it is believed that the health crisis of Covid-19 has greatly favored digital actors.
The Santander Group presidency is convinced that regulation favors Fintech companies and not the banking sector, above all, concerning handling the data that govern payments. On this point, he indicates that according to European Union regulations, banks must provide Fintech companies with access to their customers’ data if they agree to provide the information. According to the Santander Group, this requirement must be applied to all sectors’ data, including technology companies.
The crisis was not originated by Bitcoin
Many detractors of the Fintech companies affirm that the crisis in the banking sector was caused by the rise of cryptocurrencies and Fintech; however, we must take into account that, for example, the financial crisis of 2008 was due to bad decisions made by bankers, politicians, and officials public. Later studies indicate that the crisis could be avoided, but excessive risk-taking by banks and negligence by financial regulators triggered the situation. From this moment, there are new parameters for the financing and capitalization of banks.
This crisis originated many changes in the sector, among which is the emergence of Fintech and the creation of Bitcoin as a digital system and cryptocurrency, which would serve as an alternative mechanism to eliminate trusted third parties (banks) at the time of carrying out transactions. Currently, Bitcoin is an asset valued by investment funds, institutional capitals, and the bank itself.
What do you think about this topic? What do you think is the advantage that Fintech companies have?
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