The word “fintech” (financial technology) is a broad term which describes many different categories of the financial technology market. What one person may describe as “fintech” could be completely different from the next, making it difficult for inexperienced individuals to fully grasp what it is.
One thing we can all agree on is that fintech is a term which describes anything which uses the Internet to facilitate or lead to a monetary transaction. The most prominent of these categories falling beneath fintech’s umbrella, as illustrated in this infographic, include:
Digital Banks
No longer do you need to step into a brick-and-mortar bank to complete everyday or even business banking transactions. Traditional banks are feeling the strain as an ongoing number of digital banks (banks which exist purely online) are allowing users to open up online savings and checking accounts and are helping their clients with deposits, withdrawals, and transfers.
Cryptocurrencies & Blockchain Technology
Blockchain technology has the potential to revolutionize a variety of business sectors, though it has so far arguably been most prominent in fintech. The term blockchain refers to the technology responsible for creating a public ledger detailing an individual’s online transactions. This information cannot be deleted and is shared across several different areas on a network.
Blockchain is the technology which serves as the backbone for cryptocurrencies. This form of digital money uses encryption to regulate the generation of currency units and to verify the transfer of funds.
Payments
Paying another individual or company for goods and services has never been easier. Without needing to turn to a traditional bank, users can make payments to others without dealing with exorbitant fees.
This includes traditionally expensive payments like international money transfers. While banks and other money transfer companies may charge up to 8 percent in fees, fintech offers faster and less expensive transfer options.
Enterprise Tools & Software
When looking at this type of fintech, two leading branches come to mind:
- Software-as-a-Service (SaaS)
- Cloud-Based Point of Sale (POS)
Both are cloud-based and can be accessed from anywhere and at any time. Through POS, business owners can easily complete transactions when out and about as well as monitor the activity and metrics of their store in real time.
Insurance
Dubbed as “insurtech” in many circles, this type of fintech is amongst the newest to join the group. Companies involved in this category are using technologies like apps to serve customers. Being accessible and more flexible, a growing number of consumers are using this service for its convenience and competitive pricing.
Regulations
Known as “regtech,” this form of fintech uses software and apps to help users and businesses comply with what can be very market-specific and ever-changing regulations. This type of technology can also help businesses combat financial crime and mitigate risk through a number of forms including cyber security, fraud detection, and customer onboarding.
Alternative Financing
What may be the largest category on this list is alternative financing. Here you will find four distinct branches:
Rewards-Based Financing
With this type of financing, a business or organization will offer some form of incentive to users to participate in their project in exchange for funding.
Donation-Based Financing
Here users will locate projects that they find worthy of a donation. They receive nothing in exchange except perhaps a tax receipt and the opportunity to leave their name and a quick message on the donation site.
Equity-Based Financing
This type of fintech gives entrepreneurs and small startups the chance to secure small investments from a number of lenders. A financial stake in the company or assets totalling to the amount invested is offered in exchange.
Debt-Based Financing
Also commonly serving entrepreneurs and small businesses, this type of financing (also referred to as “social lending”) allows lenders to be repaid for their investment with interest or other fees. It’s an attractive option since any and all financial middlemen are completely eliminated from the transaction.
With the classic case of getting started as a P2P lender it is fairly straightforward. A lender signs up, becomes a member, and the lender then acts as your intermediary (i.e. the company records all transactions, transfers funds between members, etc.). Prior to lending, each lender is provided with a “profile” of a borrower which details what the loan will be used for, the borrower’s credit history, and the borrower’s income. Much like traditional lending, there are several levels of risk involved with the higher the risk, the greater the return and the risk of default.
VIAINVEST, however, is a bit different. It operates as an intermediary platform connecting borrowers with investors by offering safe and transparent investment opportunities. Morevoer, all loan originators are part of the same parent company as VIAINVEST itself, making it a safer bet in a way. To learn more about P2P lending opportunities with VIAINVEST, we invite you to contact us today.
