What is a Fintech?

Fintech is a portmanteau of “financial technology”, commonly used to define the use of technology to offer financial services for people.

The main goal of a Fintech company is to improve the delivering of financial services and products. It includes the fast and easy management of financial operations or processes to companies, consumers, owners, etc.

Fintech companies do it through sophisticated softwares and algorithms for desktop and mobile devices.

Nowadays, Fintech doesn’t work only for traditional financial institutions and most common services like loan application, Fintechs expanded their offering to include other sectors like education, retail banking, investment management, fundraising, etc.

Fintechs maintain their focus on trends and innovation of services in the financial sector like the development and management of cryptocurrencies (Bitcon, Binance, Ethereum, SOL, etc). Despite Fintechs growth in the last few years, the big portion of money still lies in traditional global banks and their expressive multitrillion-dollar market capitalization.

About Fintech Banking

Banks use fintech services to help them with their back-end processes, the main goal is to deliver good quality financial services like a user-friendly bank app. Customers commonly use fintech to get access to a broad spectrum of financial services like payments with your smartphone, apply for loans, check your balance, etc.

How Fintech Works

Most fintech startups are developed and managed to drive traditional financial services challenges like payments, loans applications and credit card functionalities. Their main obligation is to improve the user experience in financial platforms, providing good quality services, with an easy and fast to use approach.

Fintech companies came to offer modernity to the financial industry, nowadays it’s possible to get access for a broad range of financial services online, no requiring in-person interactions, with streamlined processes, available 24h, a user-friendly interface platform. They bring services to change the old-fashioned approach of traditional banking. A lot of people value fast and easy access to financial services because they don’t need to go to the bank and wait for hours to get support.

For example, in the past, when people need a mortgage, they looking for apply with traditional lenders, but now with a lot online mortgage lenders, they prefer that easiest option, because in the online alternatives, is possible to apply more quickly, usually the service is available 24 hours per day, with lower interest rates and a hassle-free process. Keep in your mind, the benefits provided by fintechs will improve your relationship with financial products and services.

Examples of fintech services usage are: neobanks, mobile banking apps, crypto apps, machine trading, digital wallets, e-commerce payments, investments hub, online mortgage lending, embedded finance, etc.

Fintech History

Fintech is trendy right now, but it isn’t a new term, the concept is old and dates back decades. Examples of the usage of fintech services in the past are: ATMs and their cutting tools, signature-verifying technologies that were first used by banks in the 19th century, etc.

In recent years, fintechs have had a significant growth and impact in the financial industry, showing their potential.

Now, we can see traditional banks making partnerships with fintech companies or developing their own fintech efforts. They are launching online banks, digital wallets, cryptocurrency trading systems, etc.

At Covid-19 pandemic, Fintech companies gained a lot of popularity, and the percentage of people that use financial online services increased significantly after this period.

Fintech companies took that space in the financial market because of their user-friendly platforms, customer-centric approach, and streamlined processes.

Pros and Cons of Fintech

Fintech services and offerings aren’t 100% good, before using these services, you need to learn more about the advantages and disadvantages. See below:

Pros

• Easy accessibility to all resources available, you only need to have an internet connection or stay connected in a system provided by the company.
• Storage of all your data like personal information, banking details and others.
• Time-saving services, because you don’t need to go to the bank to complete any transactions or to wait for hours to have in-person support. You can do it in the comfort of your home.
• User-friendly interfaces to help you to navigate with ease through financial services. With fintech, all processes are simplified and faster, frequently the tech teams are adjusting the features and tools of these platforms.
• Cost-effective services: usually you have access to low-cost services and products provided by fintech. They cut a lot of costs related to traditional banking offerings.

Cons

• Possibility of cyber theft: general fintech services are safe, companies are trying to develop their security protocols, but we can see a lack of it in some cases. In addition, people need to be more aware about these threats, education against fraud and theft is essential in this process.
• Technological errors can occur, the services offered are provided by technology and some errors can happen, but nowadays tech support teams are developing systems with a low percentage of error and the solutions are applied faster too with the goal of improving your overall experience.
• Fintech Companies often operate only online, with an absence of physical branches, this point can be a disadvantage for people that are looking for in-person support.

Fintech Innovation

There are new technologies being employed to bring innovation and modernization for fintechs like artificial intelligence, predictive behavioral analytics and data-driven marketing. These tools will help companies to understand more about their customers, to take more informed decisions, create a customer database and to automate a lot of processes, ensuring more ease and quickness.

Examples of new technology applications are chatbots and AI interfaces. Some technologies are employed to protect users against fraud or theft, with the goal of ensuring a safe place to navigate.

Top Fintech Startups in South Africa

See below the top fintech startups in South Africa and an overview of each one:

• Yoco: founded in 2015, this company provides payment processing solutions for businesses and merchants, the services included are NFC-enabled and hardware-based card machines, payment gateways, link-based payments, and more. With Yoco App, businesses can manage sales and track their overall performance, this application is available for Android and iOS.

• TymeBank: founded in 2012, TymeBank is a digital bank for a broad range of customers.It offers services like digital account, debit card, insurance, etc. Customers can earn rewards points on their payments with the debit card. It’s a good option for money savers in South Africa.

• Naked: this fintech was founded in 2016 and offers an AI-driven platform to provide access to insurance offers for cars, house content, single items and for buildings. Naked has an app available iOS and Android.

• VALR: this fintech, founded in 2018, is a platform for cryptocurrency trading, using it you can buy, sell and manage over 75 crypto assets. VALR uses AI and machine learning technologies to validate the identity of its users.

• Ozow: this company provides payment processing services for businesses and merchants. Ozow services include payment gateways, QR-based payments, invoice payments, link-based payments, etc. With Ozow app it is possible to make online payments via credit and debit cards, bank transfers and more.

Fintech services provide a lot of benefits for customers, businesses, owners, etc. These services can offer peace of mind for their users, with a customer-centric approach, streamlined processes and user-friendly platforms. Fintech companies are compromised with the innovation and the delivery of good quality financial services to their customers, often with low costs and hassle-free.

These companies are working hard to improve their security protocols to protect their users against fraud or theft. Fintechs are a symbol of innovation, they grew a lot in recent years, so learn more about them and start to use their services with no worries.

For more articles about finance, see our blog posts here. See you soon!