The term Fintech combines the words finance and technology. It is used to describe the blending of the structure of finance with the efficiency and security of technological innovation. People wholeheartedly believe it is the next level of financial transactions and banking.
The history of Fintech is not a long one. It was originally used to describe the algorithms attached to the backend of large financial institutions. As technology progressed and grew to encompass more mainstream concepts like cryptocurrency, there was a transfer to more consumer-centric services at all levels. Today’s modern-day Fintech now appears in different fields of industry such as banking, investing, fundraising, and education, among others.
Disruptive innovation is a very specific way of describing an industry’s growth. It refers to a change in some existing way of doing things that ends up disrupting the status quo. Sometimes new markets and products are created. Sometimes entire value networks are rearranged and new alliances are formed. The idea is always to shake things up with the intention of moving technology forward.
Fintech falls under the category of disruptive innovation by following several models of development and entering multiple sectors of commerce. There are the new entrants, seeking their own place in the world as startups. They have often done their due diligence and are ready to target a specific demographic or sell a particular product or service. They are most interested in gaining a consumer following and obtaining funding. Peer-to-peer lending is a way of acquiring financing without having to face the scrutiny of qualifiers from larger financial firms, which is sometimes the difference between the life and death of a startup company.
Existing financial institutions are using Fintech innovations to increase the speed and performance of their present-day methodologies. They invest a significant amount of money into the peace of mind that accompanies tighter security on financial transactions and customers’ private data, as well as getting a leg up on their competition.
Regardless of where a company is in its lifecycle, the concept of blockchain technology is perhaps one of the most commonly known fintech innovations. Blockchain is a technology that allows senders and recipients to make instant financial transactions on a secure network without the need for a middleman, such as a bank. All financial transactions made on a blockchain are completely secure, which is the other reason for its massive following. In addition, because of the design, every transaction is kept in a ledger that keeps a precise record of what happens.