What is Fintech?

Finance and Technology, also known as Fintech, is one of the most popular fields in recent years.

We all know that financial systems have been around for a very long time. They go back to ancient times if you count the accounting and bookkeeping practices of early civilizations. In the United States, banking took root during the 1700s. The point is that finance is an old concept. It has been growing and evolving for centuries.

"Technology" here mainly refers to chips, microprocessors, and software -- the building blocks of modern computing. The ability for machines to do faster math started gaining momentum in the second half of the last century. That may sound ancient, but it was really only about 40 to 50 years ago.

As technology has advanced, computers have kept getting smaller. Today, we carry devices in our hands that can perform millions of calculations in just a few milliseconds.

The common link between finance and technology is numbers. Modern technology trends like Machine Learning, Big Data, Cloud Computing, and Ubiquitous Computing (IoT, phones, tablets, etc.) have helped make the financial industry more efficient.

Let us look at a few everyday fintech examples in the consumer market.

(a) Better banking for consumers: A few years ago, you had to drive to your bank to deposit a check. Now many modern banks let you take a photo of a check with your smartphone and deposit it from home.

(b) Mobile money transfer: Going out with friends and splitting a bill after a meal has never been easier. Mobile payment apps make sending money between friends and family quick and simple.

(c) Digital wallets: Imagine you grab a cup of coffee from your favorite coffee shop but forgot your cash and credit card. No problem. As long as you have your smartphone, you are covered.

There are many more everyday examples. I plan to cover these use cases in depth over time. But for now, let us look at how fintech is used in large financial institutions.

(a) Algorithmic trading: With on-demand access to computing power and data, financial institutions use complex algorithms to predict market movements and make trades.

(b) Blockchain: Technologies like blockchain let companies track their assets very closely and securely.

(c) Machine Learning and Artificial Intelligence: This has been a widely used term in recent years. In a nutshell, machines can learn on their own and respond to situations without human involvement. This technology is useful in many financial decision-making processes. It helps reduce risks and optimize a company's portfolio.

As we can see, fintech touches every part of finance and commerce -- B2B, B2C, and C2C. Wherever money flows, fintech is there. Going forward, I expect this trend to continue. With a lot of new venture capital flowing into this space, there is rapid innovation on the horizon. This will push established players to adopt more modern approaches.