The Future of Fintech Business Models

The Future of Fintech Business Models

The innovation in the finance sector has led to substantial changes in the economy.

Businesses have also experienced drastic changes at an alarming pace. However, in the world of finance, technological advances have enabled the industry to develop in a remarkable way.

Fintech is gaining a lot of momentum. The industry attracted $2 billion in investment last year. The company and the customer can align interests in ways that are more efficient and economical. When the Fintech industry grows, it has the potential to deeply influence both large businesses as well as their customers.

Let us have a look at the outline of what we shall be discussing in this blog post.

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What is Fintech?

Is Fintech Changing the Way Tech Companies Do Business?

Types of Fintech Business Models Most Popular Fintech Product Examples Why is the Fintech Model Advantageous?

What is Fintech?

The fintech industry aims to revolutionize and automate financial services, turning them to become more efficient and effective. It facilitates consumers, businesses, and companies to organize their payments and financial transactions conveniently.

Over the years, the fintech industry has grown exponentially. Americans have the most fintech startups in the world, noticeably 10,605 startups as of February 2021.

Globally, India is among the leading Fintech markets. A market worth $31 billion is being developed in India for fintech, which will expand at an anticipated 22% compound annual growth rate (CAGR) to $84 billion by 2025. A surge in the adoption of fintech fueled by Machine Learning (ML), data analytics, and Artificial Intelligence (AI), automation has remodeled the financial sector.

Fintech companies can use these technologies to analyze massive amounts of data using algorithms designed to detect trends and risks, fraud activities, and analyze data directly to take or recommend intelligent actions based on this information.

Is Fintech Changing the Way Tech Companies Do Business? eCommerce players such as Flipkart have incorporated fintech business models to take advantage of the growing trend of cashless payments. For instance, consumers have the option of ‘buy now, pay later’. In addition to this, Flipkart offers mobile phone insurance under its Complete Mobile Protection program. Moreover, it has also built a digital wallet that is compatible with UPI. The payments market in India has been entered by global players like Google, WhatsApp, and Amazon.

Financial technology companies that are in the transaction delivery space create free products, such as expense management apps, in order to collect customer information and cross-pollinate it among the business to determine a customer’s likelihood of paying premiums, purchasing real estate, and investing in mutual funds.

Financial companies are utilizing technologies with the help of Blockchain or Artificial Intelligence, Machine Learning, etc., to assist businesses to manage their financial activities like accepting payments, paying bills, and other financial app development solutions as needed. In addition, they support consumers, business owners, and companies to understand investment risks and purchasing alternatives before making a buying decision.

Fintech applications are being adopted by many leading financial institutions and startups to optimize their financial operations and reduce operational expenses.

Types of Fintech Business Models Alternative Credit Scoring Due to strict and outdated credit scoring criteria, many self-employed individuals cannot obtain conventional bank loans. Companies like Nova Credit, which provides credit ratings based on alternative data sources like social signals and percentile scores among similar loan groups, are taking a new approach. Over time, an intelligent and self-learning algorithm combined with all these qualitative factors could lead to more informed lending decisions. For instance, a lender can avert loan recovery by determining negative profiles based on social presence prior to loan disbursement.

Peer to Peer Lending (P2P Lending) It is estimated that Peer to Peer (P2P) Lending Market will grow at a CAGR of 26.6% from USD 138.71 Billion in 2020 to USD 912.43 Billion by 2028. A person uses peer-topeer lending when they want to borrow money from another person. It is also possible for businesses to lend money to other businesses in the same way. Investors can benefit from this model, which makes it easier for them to make loans, so they can earn higher returns than from the debt market. By creating platforms, FinTech companies like Funding Circle take a fee from the repayments of borrowers after they match lenders with borrowers.

Payment Gateways An online payment gateway lets customers pay for a product on a retailer’s site.

Nowadays, banks charge high fees for debit cards, digital wallets, credit cards, and cryptocurrencies. But, FinTech companies are using a model that permits them to consolidate all of these payment methods into a single app that online merchants can effortlessly download and deploy on their website. You can hire an eminent payment app development company to develop applications like Alipay, iZettle, Stripe, PayPal, and so on which are ideal for businesses selling physical goods and services to customers.

Insurtech Insurance technology, or Insurtech, is built using digital technology, and it is usually used for sales and distribution, lead management, underwriting, claims management, and renewals. The traditional insurance industry is starting to adopt a range of dynamic technologies such as artificial intelligence, data analytics, and blockchain in order to help agents set up virtual branches, make claims faster, and maintain them more efficiently.

Digital Insurance, for instance, uses Blockchain app development services, so that claims can be processed faster. Another new-age platform that consumers can access

to compare and buy insurance is PolicyBazaar, Acko, Turtlemint, OneAssist, RenewBuy, and Coverfox.

Digital Wallets Digital wallets are systems that securely store payment credentials, usernames, and passwords for diverse payment methods available as mobile and web app development solutions. Through near-field communication technology or online transfers, users can easily and quickly purchase using a digital wallet.

A mobile wallet can be used in combination with a mobile payment system, enabling customers to make transactions with their smartphones. You can also utilize a digital wallet to store information about loyalty cards and digital coupons. Paytm, Ezetap, Freecharge, JioMoney, JusPay are just a few of the digital wallet options.

Crowdfunding The idea of crowdfunding is to raise funds from many lenders by leveraging a platform where investors can showcase their ideas, funding needs, business plans, and potential.

The investor can view the communication of the investees, interact with them, and find out what option is right for them. In the pooled funding mechanisms, each participant (investor) provides a small amount, and the money is used by the beneficiary (investee) to support the declared cause.

Digital Banking Consider the possibility of your bank going entirely online – without a physical office, without bank tellers, without postal mail. Many banks now offer both individual and corporate accounts that rely entirely on digital infrastructure. As per the Statista report, 61% of Americans used digital banking in 2018, which is now forecasted to rise to 65.3% by 2022.

N26, for example, offers no-frills banking services for individuals and businesses through its complete digital ecosystem. This is almost the same business model as a bank with physical branches, and the customer benefits from reduced rates because of the enormous savings in workforce and rent.

Asset Management Do you ever wonder what it would be like buying stocks and mutual funds without having to pay a commission? Robinhood, for instance, offers investors the opportunity to trade for free in return for their data. Data from this source is used by high-frequency traders, who can then manipulate the asset’s price. Despite paying a slightly higher price for the asset, the investor still gains profit because they save money from trading fees, which is somewhat higher.

Digital Insurance The Fintech sector, with its focus on insurance, is taking all traditional services to the digital world, along with digital banks. The Fintech companies providing life and health insurance offer their prices at variable rates based on the customer, which allows them to offer aggressively lower rates compared with traditional insurers. By combining these types of insurance with customized marketing, insurance companies can create new business opportunities that haven’t yet been explored. An example of this is Lemonade, an insurance company that provides home insurance.

API-Based Bank-As-Service-Platform The API-based bank-as-a-service platform serves as the backend that hosts individual Fintech startups and synchronizes them with any traditional banks. Financial institutions can use platforms such as these to introduce products to new markets and quickly start their businesses. It allows non-banks to expand their product offering and reach new markets quickly and efficiently.

Take a look at a few fintech companies that have made their mark by delivering innovative financial solutions to customers:

Most Popular Fintech Product Examples Payfirma Michael Gokturk founded Payfirma in 2010 to allow customers to pay any time, anywhere, and at any location. The company helps businesses accept debit and credit card payments online via mobile, e-commerce, and in-store payment terminals under one merchant account. Transactions at Payfirma are processed using a cloud-based platform, which allows business analytics to be accessed quickly, such as sales data.

MANTL MANTL helps banks and credit unions integrate omnichannel account platforms within their core systems to improve backend tasks and grow deposits. Financial institutions rely on the company for tools that enable them to customize user experiences and branding, implement data visualization tools, and automate KYC decisions in order to increase conversions and simplify deposit processes.

Mogo Inc. MOGO Finance Technology Inc. (MOGO) is an online lending platform that gives a variety of credit solutions to millennials, including prepaid credit cards and short-term loans. MogoCrypto was released in 2018 for buying and selling Bitcoin

cryptocurrencies. Mogo had more than 1.6 million registered users as of July 2021. It offers quick access to a competitively priced service and emphasizes the user experience, making it the Uber of finance.

CHIME Cathay Innovation company Chime (also a CHIME) reimagined how banking works for the underbanked in the US. According to reports, Chime is expanding rapidly, reportedly having over one million customers. Their main strength is their method of generating revenue. A Chime Bank account is free of charge and includes no surprise monthly charges and overdrafts. A pioneer of mobile banking, the most innovative offers no-fee accounts and automatic savings, in addition to early paydays via direct deposit.

Shopify Founded in 2006, Shopify Inc. (SHOP) provides multi-channel commerce platforms for small and midsize businesses. It was started in 2004 by Daniel Weinand, Tobias Luke, and Scott Lake in Ottawa. With the help of a Shopify development company, developers allow merchants to improve the customer experience as they can directly interact with them and can manage multiple channels, such as social media, web, and mobile. The company served approximately 175 countries as of April 2021.

Why is the Fintech Model Advantageous?

High Level of Convenience In the financial sector, predominantly mobile connectivity is practiced. This will substantially increase the number of individuals accessing the Internet. In addition, it increases the adeptness and effectiveness of transactions. Also, a business will have a better chance of streamlining its customer service with an improved all-around customer experience. In addition, consumers have many options available to manage their finances, such as mobile devices and tablets.

A fintech company like Adyen offers a unified platform of payments, as well, adding advantages to the company. Clientele includes many large companies and major companies such as Uber, Spotify, Burberry, Netflix, L’Oréal, Facebook, & Microsoft.

Robo Advisors Robo advising is relatively fresh and one of the crucial divisions of fintech. Customers of these services are asked specific questions, and algorithms are used to develop a customized investment strategy. An investment account typically does not require a minimum deposit to get started, and advisers can select low-cost assets. If you bought assets or wanted to keep them, you will pay for the services later. Balances and asset

allocations do not incur additional fees. In addition, it is one of the easiest ways to plan an investment or banking plan for the future.

Further Service Scope Innovation in finance is made possible through fintech. This broadens their reach and area of service. Mobile technology is getting a lot of attention from financial technology companies. More people will be able to take advantage of these services. Transactions will also be more convenient and of better quality. Users can also access their accounts through smartphones and tablets. As a result, the company’s operations will be streamlined.

Improved Security Taking advantage of today’s technology is essential for financial institutions. The same applies to high-tech monetary services. This will enable people to use financial services with more confidence. The most current security measures should be used. In addition, mobile technology has led to significant investment in security. This allows consumers’ data to be protected. This includes biometric and tokenized data. The use of data encryption among businesses in this field is among the latest security solutions.

Greater Acceptance Percentage Most of the banking system needs to focus on the approval rate as a distinguishing factor. With the use of fintech, this process is now much more straightforward. Digital lenders are available online, and approval can take place within one day of requesting them. They can access all types of services they require by providing the information needed to process their data. It is credited to the automatic process enabled by artificial intelligence in the banking sector, which is expected to accelerate the process faster than what a human can deliver.

Lower Costs Both consumers and businesses find fintech to be the most cost-effective option. Since there are no hidden fees, it is more economical than traditional options. Furthermore, it enables a unified user experience by integrating physical and digital payment methods together. Hence, it gives companies a competitive edge. Convenient mobile payment options and reduced transaction costs also make this an attractive option.

Concluding Thoughts!!!

There is no denial that fintech has made a significant impact on the way businesses and consumers conduct business, and it is bringing innovation to technologies and financial sectors from all over the world. The Fintech development company can assist business owners in their financial models allowing them to make better decisions.

The Fintech industry has undoubtedly shaped the future of next-generation financial services. Despite a few hurdles facing fintech start-ups in the current business environment, it is apparent that the fintech industry will prosper, no matter where it operates.