FINTECH DOMAINS EXPLAINED

you've heard of fintech and the fact that financial technology is the future of finance but you also know that finance is quite broad and encompasses several domains like banking investments credit and lending financial markets and insurance so if fintech is the future of finance then logic suggests that it should also have several domains as well right exactly fintech is now an umbrella term with several subdomains so in this video i'm going to break down the various domains in fintech to share a better understanding of what each entails if fintech is an area of interest for you or a possible career path then watch this video to the end because you probably might be able to decide which domain you want to specialize in or has the most potential for a business or investment within your territory let's jump in [Music] hello friends welcome back to the channel my name is jeremy and if you're new here and haven't yet subscribed please consider doing so because on this channel i speak about fintech digital transformation and agile career development fintech has gone through so many changes and a lot of evolution in the past couple of years the recent hype or boom of fintech can be attributed to the fact that technology has advanced significantly across the globe in 2008 when the financial crisis hit institutions were forced to focus heavily on regulation and that triggered innovation within the space smaller players were able to step in because the incumbent institutions lost the trust of the people and the people wanted more personalized services in 2020 the pandemic made digital transactions a necessity and no longer a luxury of convenience fintech is easing the lives of customers worldwide and in emerging markets like africa where seeing mobile network technology powering financial inclusion and bringing more and more people into the financial system fintech has changed the way we transfer money borrow and lend find and interact with customers get insurance engage with our banks and the list goes on all of these functions have now become sub-categories or departments within the fintech ecosystem that various players are specializing in we've heard of massive investments going into fintech sectors so let's delve into the categories namely paytech regtech lendtech bank tech intro tech and wealthtech let's begin with the most popular fintech category which is paytech and just like fintech is the combination of payments and technology it includes everything ranging from everyday contactless transactions e-wallet transfers all the way to cryptocurrencies and the internet of things it is the subset of the fintech industry that focuses on transactions and payments rather than finance as a whole and the main idea behind paytech is that in the past payments were just an exchange of money i want something from you i give you the equivalent value in cash you give me the goods and i'm on my way pretty simple but now with innovation and payment methods mobile advancements and wearables and embedded finance which is essentially integrating financial services into non-banking apps or platforms or websites like paying for something on amazon or aliexpress the way we make payments and transact has changed dramatically more and more people are switching to mobile and digital payments meaning that the customer experience of paying has evolved as well now there is a massive opportunity to evolve the customer experience with innovation and technology and that is the main focus of the paytech subdomain the payment industry is growing rapidly each year capgemini's 2020 world payments report showed us that non-cash global transactions grew by 14 to approximately 700 billion dollars in 2019 and that was even before the pandemic in 2020 e-commerce sales grew by 209 according to aci worldwide so you can see that the paytech industry is booming now with regulations like psd2 and open banking we can only expect the growth to continue there is continuous growth in e-wallet adoption and the pandemic came in to encourage cashless transactions some are even predicting 1.3 billion mobile payment transactions will happen by 2023. so lots of players are joining the paytech industry to capitalize on these opportunities electronic money issuers card network operators payment service providers and gateways are some of the popular ecosystem participants so from the way things are shaping up and how rapidly we are transitioning towards digital we can expect that in the near future playtech may not even be a subcategory of fintech but will probably stand alone as a separate entity customers expectations are changing constantly and they will continue to demand for more online and digital payment avenues so there's tremendous potential for growth in the paytech sub domain next we have rec tech or regulatory technology now this term was first coined by the uk's financial conduct authority fca back in 2015 and they defined it as a subset of fintech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities in simple english rec tech is any technology that helps companies comply with regulations now even though this subcategory is relatively young rep tech is maturing rapidly we have seen a number of huge market crashes and institutional fraud cases that caused a spike in the shared amount of regulatory policies within the financial industry in fact according to reuters cost of compliance report a new regulatory update is implemented every seven minutes these fines are hefty and are becoming more frequent and severe institutions are having to pay well into the billions of dollars in fines each year so it's only natural that they would seek out the most innovative ways to ensure compliance rected companies emerge and are now leveraging machine learning natural language processing blockchain ai and other technologies in order to bring the power of digital transformation to the previously traditional world of regulatory compliance now initially the financial services industry met rec tech with a lot of doubt and hesitation which is understandable because even though the solutions that rec tech presented are attractive when it comes to regulatory compliance there is very little room for error before you are hit with another hefty fine a lot of the incumbent players wanted rected companies to prove their solutions before they would take any chances with them that is where investors came to the rescue now the investors understood the massive opportunity that existed within the space and they backed it with their capital and it was a lot of capital at that according to the rec tech analyst from 2015 to 2019 red tech investments rose from 1.1 billion to 8.5 billion and these investments helped to push the red tech industry past pilots and out of the innovation space now the boost they received from investors served as enough to convince financial institutions that the value that they provide was real and effective as long as it was implemented correctly and responsibly now recta creates greater efficiency and accuracy than the manual cellular processes which causes those compliance gaps and it also creates improved risk management and better internal alignment so the future definitely looks bright for directx sub domain next on our list is lentec but now it's pretty obvious that it stands for lending and technology and many of us have become familiar with finding services for our needs online getting loans or credit is no exception as fintech continues to grow and become more popular consumers also start finding ways to access the services that they previously could only find in a traditional bank online lending technology became the new norm for people who are looking to secure a law so very simply lentec is a sub-domain of fintech that focuses on providing loans and other forms of credit to people securely either online or via mobile telephony sometimes lender companies partner with traditional financial service providers like banks and other times they do not need them at all some popular models of lend tech companies are peer-to-peer or p2p lenders and crowdfunding lenders now p2ps connect potential borrowers to lenders or financiers online the popular lendtech companies are upstart lending club and sophie crowdfunding platforms typically are a little different because they help connect people with money to people who need it usually from a group of donors that are trying to raise capital or offer capital and this isn't a typical credit form because the recipient isn't usually required to pay back crowdfunded capital now there are by now pay later companies where you can make purchases and pay back an installment or on your own payment sales with no additional fees even in emerging markets such as africa there are revolutionary companies such as jumo that are able to offer credit to the unbanked market by leveraging mobile network data and generating credit scores based on alternative data jumo has given out four billion dollars worth of loans to people across the african market and have some of the highest collection rates the fintech lending space is never stagnant and is constantly competing or collaborating with traditional banks for more secure and innovative forms of lending for the banks that have been resistant to adapt technology trends it has only given lentex the advantage to meet those customer needs lentex are taking advantage of electronic platforms and alternative data to get accurate depictions of borrowers in order to better serve the market so that's a space we should all expect big things to continue happening from bank tech is next and is pretty much the most self-explanatory banking technology is essentially technology for banks as banking becomes more of something we do rather than somewhere we go lots of traditional banks are undertaking internal digital transformation agendas the target end result is to have a modular api driven end-to-end digital banking platform to grant customers a unique experience obviously banks are not technology institutions and even though they may have technology departments the main expertise and focus is on developing and delivering the best products to customers and also serving as those intermediates between the customers who have extra and those who want to borrow and that's where bank tech institutions come in these are the technology companies that come in to facilitate a bank's digital strategy and allows the bank to focus on banking they leverage new and advanced technologies to enable banks to offer better services to customers in a secure reliable and sustainable manner to give the banks a competitive advantage in the industry the bank tech is quite a broad category because it's inclusive of all the players that integrate with banks to assist and facilitate their services via apis most of these players also fall under the other domains of fintech so i won't go too deep into examples but it's important to note that not all fintechs are looking to compete with the banks in fact it's actually a more reasonable play to collaborate with the banks and leverage their experience and capital to achieve better outcomes and that is the strategy of bank tech companies next up we have insurtech now following the same trend ensure tech stands for insurance technology and it's the term that has been given to companies that are using technology to innovate and disrupt the insurance industry now even though in short tech it's in its early stages there are startup incubators dedicated solely towards in short tech larger companies are collaborating with startups to update their offerings by taking advantage of technology like big data and ai and this presents lots of new and exciting opportunities coming from within the space today's consumers want to be able to purchase travel insurance with the tap of a button or with a swipe and not fill lots of forms in short tech startups recognize this and want to do something about it intro tech companies are using data from wearable and mobile technology to create and offer more tailored policies they're able to pivot away from hard copy documents to using online digital signatures as a means of verification and the more advanced and shorter companies are able to harness ai to take on the mundane and repetitive tasks that previously required an insurance broker and show tech is essentially aiming to leverage technology to improve the user's experience with insurance processing quicker claims providing more user-friendly interfaces eliminating the brick and mortar aspects and simply making the previously boring insurance space exciting again now this is a domain of fintech that is on the rise and considering the size of the insurance industry the potential for growth is exponential and finally we have wealth tech now world tech emerged in response to that intersection between digitalization and the world of investment and world management so it's a combination of wealth and technology that brings all the digital tools focused on facilitating the process of wealth management as the other sectors of the financial industry are getting pressure to innovate due to the presence of more proactive and agile startups it's only natural that the world management sector also begin to follow suit as well one of the largest factors for the rise in weltec is that previously the most affluent people were the older generation of boomers who were content with traditional avenues of service now with the great wealth transfer underway the tech savvy generation x and millennials will possess most of the wealth and that generation has a preference for more digital tools if you add the effects of the pandemic to the mix then it makes it a no-brainer that wealth management or the wealth management industry has to evolve accordingly more and more we're hearing of robo advisors cryptocurrency trading apps and social trading platforms technology is powering wealth management in the modern era and world tech has become an established sub-domain of the fintech ecosystem so friends there you have it those are the various sub-domains of fintech for those who might have thought fintech was limited to just one area i hope this has given you some better perspective of the myriad of opportunities that lie within the space regardless of whether it's a career you're pursuing a business within fintech you want to start or just an investment opportunity you're looking for there will surely be a domain that matches your interest i hope you found this video valuable and if you did remember to hit the like button and leave me a comment and remember the place to grab your african themed prince is where ghana and the link is in the description so you can go get yours at a discount i hope you have an amazing week and i'll see you in the next video cheers guys you

Channel: Jeremy Quainoo

Views: 37,213

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Id: zvw_DMamBhM

Length: 15min 1sec (901 seconds)

Published: Sun Apr 03 2022