Financial technology

from Wikipedia, the free encyclopedia

Financial technology ( English financial technology , shortened to Fintech or FinTech ) is a collective term for technologically advanced financial innovations that result in new financial instruments , services or intermediaries . In a narrower sense, the term fintech is often equated with the companies that offer digital or technological financial innovations.

Solutions for the insurance sector are referred to as insurance technology (also InsurTech ), solutions for asset management as WealthTech and those for payment transactions as PayTech .

definition

Financial technology, or fintech, is a new financial industry that uses technology to improve financial activities. These differ in at least five design areas. The first concerns the different sectors of the financial industry with the banking and insurance industries. A second concerns the technical area of ​​application, whereby most FinTech start-up companies often focus on one of the areas of payment, protection, investment, provision, financing or consulting. Examples are mobile payment solutions or social trading solutions for the investment sector. A third area concerns the addressed customer segment. Examples are applications for peer-to-peer credit in retail banking or electronic marketplaces for corporate finance for corporate banking. A fourth distinction concerns the form of interaction, in which, for example, community banking approaches for the C2C area or online portfolio management systems in the B2C area can be found. Fifth, the approaches differ in terms of their positioning vis-à-vis financial service providers. A first form are solutions offered by banks or insurance companies themselves, such as personal finance management systems, while a second type focuses on cooperative or competing offers for banks or insurance companies.

sector scope of application Customer segment Form of interaction positioning
  • Pay
  • To secure
  • Invest
  • Finance
  • Provision
  • consultation
  • Comprehensive
  • Infrastructure
  • Bank / insurance
  • Non-bank / insurance - bank / insurance cooperation
  • Non-Bank / Insurance - Bank / Insurance competition

Goals and potential

Financial technology is mostly used by start-ups and young companies. These try to take market share from established competitors such as banks. The new providers (e.g. Revolut or N26 ) typically aim to be able to operate their business without a banking license , since the high requirements of banking regulation represent a significant market entry hurdle. Consumers can, for example, invest money, take out a loan, complete payment transactions or take advantage of financial advice (see Robo-Advisory ) directly via the Internet without a middleman . Fintechs benefit from developments in the field of big data and cloud computing , as well as the rapid spread of smartphones, laptops and tablets in connection with almost constant access to the Internet. So it is also possible for young and small companies to attack established companies or to occupy a niche in the market. Since the advent of the internet, financial technology has been described as a potentially disruptive technology that could almost completely replace existing services. However, the market shares of the financial technology companies in the overall market are still in the per mille range.

According to Helmut Ettl , Head of the Austrian Financial Market Authority, the digital revolution is a structural shock for the entire financial sector. This relates on the one hand to technological innovations, virtual currencies, crowdfunding, financial innovations, business models and customer behavior, and on the other hand to the changed global competitive environment and the sometimes lagging regulatory recording of processes to protect consumers. Since the rules for banking regulation also serve consumer protection, the possibility of undermining these consumer protection regulations through financial technology is being discussed in public. There is a risk that investors will take too high a risk that borrowers will pay usurious interest rates.

Main areas

Financial technology has been used to automate insurance, trading, and risk management. The services can come from a variety of independent providers, including at least one licensed bank or insurer. The interconnection is made possible by open APIs and open banking and supported by regulations such as the European Payment Services Directive.

When trading on the capital markets, innovative electronic trading platforms facilitate online and real-time trading. Via social trading networks, investors can observe the trading behavior of their colleagues and experienced traders and follow their investment strategies in forex and capital markets. The platforms require little or no knowledge of the financial markets and have been described by the World Economic Forum as disruptors that represent "an inexpensive, sophisticated alternative to traditional asset managers."

Robo- advisors are a type of automated financial advisor that provides online financial advice or investment management with moderate to minimal human intervention. They offer digital financial advice based on mathematical rules or algorithms and can therefore represent an inexpensive alternative for human advisors.

Global investment in financial technology increased more than 2,200% from $ 930 million in 2008 to over $ 22 billion in 2015. According to the Mayor of London, the financial technology industry has been thriving in London in recent years grown strongly. Forty percent of the City of London's workforce is in financial and technology services.

In Europe, $ 1.5 billion was invested in financial technology companies in 2014, with London-based companies $ 539 million, Amsterdam-based companies $ 306 million and Stockholm-based companies $ 266 million. Dollars invested. Stockholm is, after London, the second most financially wealthy city in Europe in the last 10 years. FinTech businesses in Europe reached a five-quarter high, rising from 37 in the fourth quarter of 2015 to 47 in the first quarter of 2016. Lithuania has become a Northern European hub for financial technology companies since the UK left the European Union. According to statistics, Lithuania has issued 51 FinTech licenses since 2016, 32 of which last year.

In April 2015, a new financial technology hub will open in Sydney in the Asia-Pacific region. According to KPMG, Sydney's financial services sector creates 9 percent of the national GDP in 2017 and is larger than the financial services sector in Hong Kong or Singapore. In 2015, a financial technology innovation laboratory was established in Hong Kong. In 2015, the Monetary Authority of Singapore launched an initiative called Fintech and Information Group to attract startups from around the world. It promised to spend $ 225 million in the fintech sector over the next five years.

development

In 2012, 11 billion British pounds were invested in fintech companies worldwide . Three billion pounds alone went to companies from Great Britain , which were able to collect 30% of the total investment. The best-known British fintech companies include crowdlending pioneer Zopa and microfinance provider Wonga . Great Britain is thus one of the pioneers in this development and is also home to around half of the most promising European companies in this economic segment in 2014 according to the “FinTech 50” ranking. However, the USA is the world leader with a share of 60%, while Germany only accounts for 0.6% of all investments. These developments put banks under pressure.

Fintech in Germany

By 2016, more than 340 active financial technology companies had established themselves in Germany. Within Europe, the German FinTech market ranks second after Great Britain. In a global comparison, too, Germany has increasingly caught up in recent years. The regional focus is primarily on Berlin, followed by Munich and Frankfurt am Main. Financial technology companies include the mobile payment provider Payleven , the microfinance institute Kreditech, the crowdlending platform Auxmoney and the direct bank Fidor Bank . So far, Raisin GmbH has mainly raised risk capital with WeltSparen (60 million euros), Payleven (10 million euros), online payment providers Paymill (14 million euros) and Auxmoney (12 million euros). In 2010, the first short-term loan provider Vexcash launched its business model in Germany. Rocket Internet has founded fintech startups such as Lendico and Zencap that are based in Germany but operate internationally. The provider Barzahlen has made it possible to pay bills since 2013 and to withdraw cash in retail stores since 2017. Since 2019, N26 has been the most valuable German financial start-up with a company valuation of 2.3 billion euros.

Fintech in Switzerland

The fintech scene in Switzerland consists of a large number of organizations and companies with different orientations. At the same time, the Federal Council and Parliament support innovation in the financial sector with targeted measures, for example the introduction of the “Fintech license” or the federal law for the “adaptation of federal law to developments in technology for distributed electronic registers”. Switzerland's fintech organizations include the Finance 2.0 Initiative, the Swiss Finance Startups Association, the Bitcoin Association Switzerland, which was founded in 2013, the Swiss Blockchain Federation, the Swiss Crowdfunding Association, the Swiss Finance and Technology Association and Capital Markets and Technology Association. There are also international organizations based in Switzerland, such as the Ethereum Foundation.

As of April 2018, there were 224 Swiss Fintech companies in Switzerland. These are divided into 7 main categories: investing and asset management, market information and advisory portals, payment providers, crowdfunding and other alternative financing providers, crypto and blockchain applications, insurance, data management and analysis and others. The best-known Swiss fintech startups include Advanon, Loanboox, Lykke, MoneyPark, Proxeus and Sonect. In May 2019 it was announced that SIX intends to offer an open banking hub for corporate customers in 2019. Among others, the two accounting software providers Abacus and Klara will use the hub . UBS , Credit Suisse , Zürcher Kantonalbank , Valiant and the Raiffeisen Group are participating in the project. In August 2019 Numbrs became Switzerland's first fintech unicorn .

Fintech in Austria

Fintech startups have been founded in Austria that focus primarily on three areas. Providers such as Fonmoney, Wallegro, Bluecode and K-Wallet focus on making mobile payments and money transfers easier with the smartphone. Finnest, Conda and Wikifolio, among others, rely on the topic of financial products and crowd investing . The third line of development is towards comparison between banks. Providers like finpoint.at try to make it easier for companies to find external financing . baningo.com offers a platform on which banks put their advisors online. Both private and business customers can contact them. Finanzbuddy.at takes a similar approach, but focuses on the evaluation of independent wealth and financial advisors. To support start-ups, private and public initiatives have been set up in Austria for both fintechs and startups from other industries. The Chamber of Commerce provides information and advice for startups in the initial phase via Gründerservice.at. StartupLeitner offers young companies support in legal, commercial and strategic issues. AustrianStartup was created as a platform for networking in the Austrian startup scene and for representing interests.

literature

  • Rainer Alt, Thomas Puschmann:  Digitization of the financial industry. Springer, Berlin / Heidelberg 2016, ISBN 978-3-662-50541-0 .
  • Susanne Chishti, Janos Barberis:  The FINTECH Book: The Financial Technology Handbook for Investors, Entrepreneurs and Visionaries. John Wiley & Sons, 2016.
  • Patrick Schüffel: The Concise Fintech Compendium . Institute for Finance, University of Economics Friborg / Switzerland 2017.

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