By Simon Torkington, Senior Writer, Forum Agenda , World Economic Forum
Over the past decade, the global financial technology (fintech) industry has experienced a surge in growth. Digital banking and financial services are proving transformative, both in developed economies and also in regions where billions of people have previously struggled to access banking services.
New research by the World Economic Forum, in partnership with theCambridge Centre for Alternative Finance, shows growth has been driven by strong customer demand. The Forum’s 2024Future of Global Fintechreport surveyed 227 companies spread around the world. Some 51% of those companies said strong consumer demand for their services was the main driver of growth.
The global fintech industry is booming, with customer demand driving growth.
In developing nations, digital innovation by fintech companies has allowed entire economies to bypass the high-street bank system, and offer a multitude of options to people who would likely be excluded from traditional banking systems.
Bryan Zhang, Co-Founder and Executive Director at the Cambridge Centre for Alternative Finance, says fintech is “creating alternative instruments, channels and systems, for accessing credit, for getting a loan, for making a payment, for getting insurance products. The current financial system, which is very much banking-based, cannot reach all of the populations that need these vital financial services.”
In an interview with the World Economic Forum, Zhang singled out three ways in which fintech is proving beneficial.
1. Fintech opens up opportunities for female entrepreneurs
“We see clear evidence that fintechs in many parts of the world have expanded their customer base to cater for the needs of women entrepreneurs,” says Zhang.
By using digital platforms, women can access capital, engage in crowdfunding and manage their finances with greater ease, he says. This democratization of financial services is levelling the playing field, allowing more female-led businesses to emerge and flourish. Fintech’s emphasis on financial literacy and networking further equips women with the necessary tools for success.
2. Digital finance boosts small and medium-sized businesses
Small businesses around the world face persistent funding gaps but a lack of access to finance is a particular problem for small and medium-sized enterprises (SMEs) in emerging economies.
Zhang says digital finance is a game-changer for these SMEs, citing the use of alternative data that can be applied by fintechs to make business financing decisions. “Social media data, psychometric data, biometric data, or even FedEx or UPS shipping data … are important alternative data points that could be utilized to offer SMEs a very quick, robust, and accurate credit decision,” he says.
This alternative data strategy means SMEs now have access to a suite of financial services that were once the preserve of larger corporations. Digital payments, online banking and lending services are enabling SMEs to expand, innovate and contribute to economic growth.
3. Fintech offers banking services to people in remote communities
Mobile banking and digital payment platforms are bridging the gap for those far from bricks-and-mortar banks, offering essential services like money transfers, bill payments and savings accounts.
Zhang says that for the first time, fintechs are offering financial services to “people from lower income backgrounds, in rural and remote areas. So it’s fantastic to see fintechs striving to be more inclusive in the provision of digital financial services”.
Risk and regulation in fintech
The rapid expansion of fintech is empowering not just those in emerging economies but also in developed countries. By increasing access to financial services, supporting SMEs, and reaching remote communities, fintech is fostering economic development and financial inclusion.
There are risks, however. Consumers falling victim to fraud and scams is a key one, Zhang says, especially via social media. “A robust regulatory and supervisory framework” is essential, he says.
The Forum’s report found that 68 per cent of fintechs surveyed consider the current regulatory environment to be adequate, but that “a substantial portion find regulatory compliance challenging and the licensing and registration processes to be problematic”.
Zhang says fintech must “balance the need for growth, for financial innovation, with that of regulatory actions… and policy innovations.”
Thisarticlefirst appeared on website of the World Economic Forum.
FAQs
Fintech offers banking services to people in remote communities. Mobile banking and digital payment platforms are bridging the gap for those far from bricks-and-mortar banks, offering essential services like money transfers, bill payments and savings accounts.
What is good about fintech? ›
Fintech offers banking services to people in remote communities. Mobile banking and digital payment platforms are bridging the gap for those far from bricks-and-mortar banks, offering essential services like money transfers, bill payments and savings accounts.
Why is fintech so successful? ›
In conclusion, the success of fintech can be attributed to its ability to harness technology to provide innovative and accessible financial solutions. From personalized services to streamlined transactions, fintech has transformed the way individuals interact with their finances.
What is the advantage that fintech has? ›
Advantages of Fintech:
their bank accounts, make payments, and transfer money from anywhere, at any time. overhead costs. service. their customers' needs and provide them with personalized solutions.
What is fintech and why does it matter to all entrepreneurs? ›
Financial technology (better known as fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. At its core, fintech is utilized to help companies, business owners, and consumers better manage their financial operations, processes, and lives.
What are the pros and cons of fintech? ›
Overall, fintech has brought about many changes and advancements in the financial world. Fintech's advantages include easy access, transaction efficiency, and lower costs. Nevertheless, fintech also has disadvantages, such as data security issues, technological dependence, and a lack of consistent regulation.
What is the main goal of fintech? ›
The primary goal of financial technology (FinTech) is to use innovative technology to improve and streamline financial services. FinTech aims to enhance efficiency, accessibility, convenience, and security in various financial activities, including banking, investing, payments, lending, and insurance.
Why should I choose fintech? ›
Be exposed to exciting career opportunities
One can expect new jobs to be created daily in a fast-paced industry like fintech. Unlike mature industries, one can expect to adopt new skills and experiences that can be transferrable to various fields of expertise and environments.
What's interesting about fintech? ›
FinTech simplifies financial transactions for consumers or businesses, making them more accessible and generally more affordable. It can also apply to companies and services utilizing AI, big data, and encrypted blockchain technology to facilitate highly secure transactions amongst an internal network.
Why is fintech cool? ›
Fintech vs. Traditional Banks: Fintech apps offer transparent, user-friendly solutions, outshining old-fashioned banking apps. They prioritize customer-centricity, disrupting outdated banking practices and making services easily accessible via mobile devices.
Fintech platforms empower individuals and businesses to take greater control of their finances. User-friendly investment apps, robo-advisors like Robinhood, and alternative trading platforms like Binance are examples of how technology has made financial services more accessible to everyone.
How fintech is better than bank? ›
The primary distinction in comparing FinTech vs Banks lies in their approach to financial services. FinTech companies offer convenient and user-friendly solutions aimed at modernizing banking experiences. On the other hand, traditional banks prioritize stability and trust in their service delivery.
How does fintech affect us? ›
The digitalization of financial markets and the rise of FinTechs have allowed the development of faster, more efficient, and user-friendly financial services (Goldstein et al., 2019). However, issues such as regulation and security are also important factors affecting the integration of FinTechs with financial markets.
How does fintech help? ›
From clarifying spending patterns to facilitating efficient budgeting, providing instant digital access, and tracking progress towards financial goals, fintech offers a multitude of benefits that help consumers navigate turbulent times with greater resilience.
How is fintech changing the world? ›
Fintech, or financial technology, has been instrumental in reshaping the financial services industry, especially over the last fifteen years. It has disrupted traditional business models and created new opportunities for businesses and individuals alike, both in enterprise and consumer segments.
What makes fintech different? ›
Fintech companies are often industry disruptors—they use technology to change how consumers interact with the financial industry. This often includes expanding access to financial products, lowering fees, and providing faster, more personalized service.
What is exciting about fintech? ›
Fintech offers an exhilarating opportunity to be at the forefront of innovation, shaping the future of finance. Working in fintech allows you to explore novel ideas, challenge the status quo, and create transformative solutions that disrupt traditional financial systems.
What makes fintech unique? ›
Fintech democratizes financial services by making them more available to all consumers, especially those who are under and unbanked. With fintech, they can quickly open a bank account on their phones through a diverse range of fintech apps.
What is the point of fintech? ›
FinTech simplifies financial transactions for consumers or businesses, making them more accessible and generally more affordable.
