Technology has transformed the aspect of consumption, production and distribution of financial products and services. The entry of new entrants such as Fintech firms is influencing innovation in this sector with the established players such as, retail and investment banks, micro finance institutions, insurance companies, and others, being forced to transform themselves to stay afloat. What are the challenges and future of Tech-Enabled Finance? Fintechs offer financial services through tech-driven, modern business models.
The market consists of giants, such as Google, Amazon, Apple, Vodafone or Alibaba, and of newer businesses based on a certain niche of the financial business, including payments and transfers (AliPay, Vemmo), loans (Kabbage), investments (Nutmeg), payment processing (Adyen), risk analysis (AlgoDynamix), and many other parts of the value chain within a bank (see infographic).
What is Fintech?
Having amounted 20.9 billion dollars, which is 16 billion more than it was in 2013. The high penetration of cell phones and the high proportion of people underprivileged in the banking sector or who are not banked, Latin America and the Caribbean are emerging into fertile soil to drive the evolution of the Fintech sector. As stated by the Latin American Private Equity and Venture Capital Association (LAVCA), the industry drew 40 percent of total invested by Latin American and foreign private equity funds during the first half of 2016 in information technology and telecommunications as compared.
To 29 percent in 2015. Such names as Nubank, Mercado Electrnicio, Afluenta, Moneyme, GuiaBolso, and BankFacil caught the interest of the Silicon Valley investors. The most vital Latin American regional hubs are growing in Mexico then followed by Brazil, Colombia and Chile in terms of Fintech innovation. Governments will be saying much regarding the future development of the financial industry. The key issue is the need to provide the Fintech innovation and at the same time to defend the users interests and the stability of the financial system. The cooperation of the Fintech industry.
What are banks?
Can encourage the modernization of the banks and the other financial institutions, nevertheless, the suitable regulations have to be present to support this connection, as in the United Kingdom and the European Union. The regulations can also work in order to increase financial inclusion and this would have extremely strong positive implications on disadvantaged sectors as well as the economy of most emerging economies. Large banks are already collaborating with Fintech, so banks, microfinance institutions, and other small or medium-sized financial companies need to follow.
One of the issues is that they have failed to acquire skills to analyze available solutions and determine how some Fintechs might enhance their products and operational geriatrics. The later they put this in action, the harder they will find it to stay as part of the new world of finance in the digital age.
Why is fintech growing?
Traditionally, business lending has long been the least part of the financial portfolio of the major traditional financial institutions. It is so because they can provide a substantial volume of capital and they have experience in giving commercial loans as well as they are generally the first to deal with the financial world. This has created suspicions, miscommunication and a lot of misconceptions on the financing possibilities that are available via fintechs and a common myth is that they are no good institutions yet the contrary is the true case. That is why a significant number.
Of business owners or CFOs do not know which of the financial companies provide the best loans and under what terms, and they miss out such a chance as fintech credits. That is why here we will compare the business loans issued by the traditional organizations and by the fintechs and compare the costs and rates, the approval scheme, the requirements, and the documents needed. At first sight, traditional institutions have access to various types of financial products and resources which can satisfy the majority of financial requirements of a company. However the truth.
Conclusion
Is that they are not always the best thing to offer or the best option because the following reasons are behind it Compared to the more traditional financial products, those proposed by fintechs, in general, are more flexible; the access requirements tend to be simpler; they have more competitive interest rates (without having to offer guarantees) and, last but not least, they are approvable in less time. Why is it so All these benefits are possible due to one thing in common, technology. Fintechs have transformed how businesses can get credit, by means of financial creativity.
Which promotes a very quick and accurate process of analyzing customers with more reduced margins of mistakes. Therefore, fintechs can provide financing at low costs and in more responsive ways, and this aspect will not be of risk to them. Fintechs are usually constructed with an added focus on financial inclusion and transparency, which means that they may work more towards explaining the terms under which they operate to their customers clearer and being more explicit when it comes to the fees and interest rates that they prescribe. In accordance with these principles.
