Ankur Ghosh, Founder & CEO, SSV Capital Ltd discusses how fintech is disrupting traditional finance and attracting interest from both investors and the millennial generation.
Fintech is becoming a huge part of the financial industry. Fintech companies are not traditional banks, but they provide many of the same services as well as other services which support and enhance traditional financial services.
Fintech companies are innovating faster than banks, and their popularity is growing rapidly among millennials—who are more tech-savvy than previous generations.
Fintech combines finance and tech in one industry
Fintech is a combination of financial and tech in one industry. Fintech companies offer services that banks don’t always provide, such as better customer service, no hidden fees, a simpler way to transfer money abroad and faster payments.
They are also making investing easier with new tools such as robo-advisors (which use algorithms) or smart beta funds (which take advantage of market anomalies).
Fintech companies are increasing in popularity
You might not have heard of the word “fintech”, but you’ve most likely used fintech products. Fintech companies are the ones who provide apps such as Venmo and PayPal, or financial services such as personal loans and mortgages. Since 2008, when President Obama signed the Jumpstart Our Business Startups Act (JOBS), fintech has been on an upward trajectory of popularity. The JOBS Act allowed small businesses to raise capital from non-accredited investors online through equity crowdfunding platforms such as Indiegogo and Crowdfunder; it opened a door for start-ups in fintech to take off.
Millennials have also helped fuel growth within this industry by using these new technologies and getting involved with investing early on in their careers.
However, it’s not only users who love fintech – fintech companies also appeal to savvy investors, with growing interest from traditional investment funds, investor portfolios, and even crowd funding.
What are the benefits of fintech companies?
There are many benefits to fintech companies and start-ups are coming online all the time.
Fintech companies are innovative, simple, affordable, and convenient. They are easy to use and offer better customer service. Compared to traditional banks, fintech companies provide a better experience for customers who want to learn more about their finances or set up savings accounts online.
As you might expect, millennials are more likely to use fintech companies than older generations. The reason for this is simple: millennials prefer digital services, and they’re more open to new technology – especially when the services are more accessible and cheaper than traditional banks. Challenger Banks have been particularly disruptive and are extremely popular with millennials.
Main Advantages of using Challenger Banks
- Faster payments: Banks are not known for their speed. Fintech companies, on the other hand, can be up and running in just a few days. And because they’re not burdened by bureaucracy, they’re nimbler when it comes to delivering a new service or product.
- No hidden fees: Many banks charge hefty fees for services that should be free—for example, if you want to transfer money abroad or pay an overseas bill with your bank card. In contrast, fintech firms are trying to make those things easier and faster.
- Better customer service: Banks have been criticized for their impersonal treatment of customers but many fintechs are implementing technology to improve customer service or add new techniques. For instance, Monzo recently launched its own version of cash machine called ATMless where customers can withdraw cash using their smartphone rather than having to visit an actual branch.
Fintech companies tend to innovate quicker than traditional banks.
With no digital transformation required, Fintechs are not burdened with legacy systems, so they can be more agile and innovative.
However, fintech startups are often founded by people who understand the industry inside-out—and who know what consumers need before anyone else does.
Fintech companies are harnessing big data to deliver a personal service
Big data is helping fintech companies improve customer service. It is also at the forefront of enabling fintech companies to understand their customers’ needs better, and improve the quality of their products.
Here are some examples of how big data is being used in fintech to give customers a better experience:
- A financial institution may use big data to learn about its clients’ spending habits and risk profiles, so that it can better serve them with tailored offers and services.
- A credit card company may use machine learning to detect fraudulent transactions instantly, which will result in faster resolution of disputes.
Investment in Fintech
Investment in fintech is a huge growth area with big potential in 2023 and beyond. Whether adding to an existing portfolio for diversification or investing in a fintech fund, the sector promises strong rewards and plenty of security. Most large investment companies are, if you will pardon the pun, banking on Fintech for their investors.
About the author
Ankur Ghosh is the Founder & Ceo, SSV Capital Ltd. SSV Capital offers fixed income investments to investors that qualify as high net worth or sophisticated. If you feel you qualify, and would like to explore our range of investment opportunities click here