Fintech: Companies that use technology to offer financial services in a simpler, more efficient, and cheaper way for everyone.
What is Fintech?
The term “Fintech” originated from a neologism formed by combining the words financial and technology. It is used to refer to startups or companies that offer digital financial services and products, where technology is the main differentiator compared to traditional companies in the sector.
In general, fintechs allow customers to manage products entirely via smartphones, without needing to visit a branch or broker. Knowing what a fintech is an important step towards finding better alternatives to traditional banking services.
Why has the term Fintech gained popularity?
The number of these companies is growing. It is a global innovation trend that has come to transform people’s relationship with money.
In June 2024, a report compiled by the Inter-American Development Bank (IDB) and Finnovista pointed out that the number of fintechs in Latin America has more than quadrupled in the last six years. Fintechs in the region grew from 703 in 2017 to 3,069 in 2023.
The idea of combining technology with financial services is not exactly new. Studies indicate that the invention of ATMs in the late 1960s was a milestone in using technology to avoid bank queues.
However, it was only with the popularization of the internet that the rules of the game really changed. In the 1990s and 2000s, easier access to the web created a new competitive landscape in almost all sectors of the economy. It became easier and cheaper to create, test, and promote new products using digital channels.
Main factors that contributed to the consolidation of Fintechs
The consolidation of fintechs in the financial market is the result of several interconnected events. Below are the main factors that significantly contributed to this solidification:
- Technological advancements: The rapid development of technology, especially in areas such as mobile connectivity, cloud computing, and artificial intelligence, provided fertile ground for innovation.
- Change in consumer behavior: Consumers are increasingly expecting simple, convenient, and personalized financial services. Companies have capitalized on this demand by offering easy-to-use digital solutions.
- Regulatory environment: Regulatory changes and initiatives such as open banking have facilitated the entry of new players into the industry, promoting competition and innovation.
- Access to capital: Fintechs have attracted significant investments from venture capital firms, private equity funds, and even traditional financial institutions, fueling their growth and expansion.
What are the advantages of a Fintech?
In general, fintechs are known for offering unprecedented financial solutions, less bureaucratic, more intuitive to use – after all, they are usually available on the customer’s smartphone – and with very low, sometimes non-existent, costs for users.
Moreover, they can reach a broader audience, including people in remote or underserved areas. This promotes financial inclusion, allowing more individuals to access essential financial services.
All this is possible thanks to technology. Born in the digital world and without large physical structures like bank branches, fintechs have reduced costs. Therefore, many offer fee-free products, making them more accessible to everyone and able to scale quickly.
What services does a fintech offer?
These companies offer various digital financial services. Below are the main ones:
- Payment: Founded to simplify purchases and sales, they offer conveniences such as credit cards without fees and annual charges, card machines, and bill payments and purchases without using cash;
- Credit or loan: To connect those who need money with those who can lend at lower interest rates, credit or loan fintechs were created. With a lean structure and credit analysis based on technology, they improve the dynamics of financial services;
- Financial management: For those who need to organize their finances, financial management fintechs have emerged;
- Cryptocurrency: With the popularity of cryptocurrencies worldwide, they have emerged to facilitate investor transactions;
- Investment: To make it easier for your money to grow, investment fintechs have emerged.
Are Fintechs safe?
In Brazil and many other countries, the financial sector is strictly supervised by the government. All companies that develop products for this sector must comply with a series of specific rules and regulations.
In Brazil, for example, the Banco Central is one of the main institutions responsible for regulating the market and monitoring the activities of the financial sector. Even fintechs must comply with strict regulations to offer their products to the public.
Since they are generally new, fintechs do not always have brands recognized by the public. One way to verify their legitimacy is to confirm if they are duly registered with the main regulatory bodies.
The future of Fintechs
Their growth trajectory shows no signs of slowing down. As fintechs continue to evolve and expand, we can expect more disruptions in the industry, promising a future where finances are more inclusive, efficient, and accessible to everyone.
Towards business efficiency
As fintechs continue to transform the financial landscape with innovation and agility, it becomes evident that traditional companies are seeking to reshape best practices. By adopting advanced financial technologies such as artificial intelligence, blockchain, and process automation, companies boost their efficiency, productivity, and competitiveness.
Now, more than ever, it is important for you, as an entrepreneur, to keep up with these trends and implement modern solutions to ensure your business’s success.
To start the technological transformation of your company, explore the services offered by Pipeline Capital, a company specializing in M&A and Ventures, providing customized solutions for every stage of business growth.
Read also:
- Brands and M&A – by Alon Sochaczewski
- Sell side: Introduction to the world of M&A – by Santiago Vieites
- Efficient prospecting in M&A – by Santiago Boher
- What is an M&A process?
- Myths and truths about selling companies
- Using M&A to enter new markets or acquire new technologies
- When to expand my business? Identifying the ideal time for the growth of your company
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