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The innovation which we also call technology was first invented with the specific goal of competing with the methods of financial transaction that are used traditionally by people all around the world in order to deliver a mode of transaction of finances. This new mode of finance is called financial technology which we also call FinTech. This is an industry which is emerging rapidly in recent times and has the potential to serve as a better alternative to the methods of transaction of finances that are used for a long time.
Every person in the world has a smartphone nowadays. With the help of their smartphones, they can do activities such as mobile banking, afford borrowing services, access investment services, and also access the cryptocurrency market. So this proves that financial technology is making financial services more accessible to the people.
The companies of Financial Technology include both types of companies. Those companies might be a start-up or they might as well be established institutions of finances. There are also some companies of Financial Technology which is having the particular goal of competing with the companies that are providing the services of financial transactions that are used traditionally. A subpart of the financial technology industry that focuses more on providing services of insurance to other people is called the Insurtech and it may also be called Insurtech companies.
After many educated technology experts reviewed almost over 200 papers which had a full study on the term Financial Technology it has been concluded by the experts is that Financial Technology is one of the fastest emerging industries which is having the purpose of improving the efficiency and also lesser the time of financial services with the improvement of technology in the field of finance. Financial Technology is the one thing that is an innovative idea which approaches a way of improving the efficiency of financial services and making it more accessible to people around the world.
Financial Technology is being used for the automation of financial services like insurance services, investment methods, services for trading, any form of banking services and also managing the risk factors while doing any kind of financial transaction which we call risk management. All these services can be provided by any kind of independent organization or service provider when at least one bank or an insurance company is involved. The interconnection between the bank or the insurance company to the independent service provider is enabled with the help of open banking systems and APIs. This interconnection gets supported by things like the European Payment Services Directive which is actually a regulation.
Robo Advisor is a class of automated advisors who provides people with advice regarding their finances. Apart from providing people with financial advice it also mages a person’s investment which means it is also designed for investment management. All these are provided by this automated financial adviser in online mode with medium to a very low amount of intervention of a human. These Robo advisers are designed by the financial technology companies in such a way that they can provide advice to people about their finances based on some algorithms and rules of mathematics. This was created with the idea that these digital advisors can act as an alternative to the human advisors who are very expensive to afford.
Companies involved in the field of financial technology use a lot of technologies. They use technologies like Robotic Process Automation that is RPA, Artificial Intelligence that is AI, a large amount of data, and also blockchain mechanisms. The algorithms of Artificial Intelligence help the banks or any kind of financial institution or organization to have a deep look into the spending habits of their customers, this helps the financial institution to understand their clients more than they used to. Chatbots created through Artificial Intelligence are getting popular and financial institutions are using such chatbots to help the customers with different services.
Financial institutions can predict their customer’s investments with the help of a huge amount of data that is big data. This big data also helps the financial institution to understand the sequence in the spending of the customers. Analyzing these spending habits and investments helps the financial institution to improve its fraud detection ability. So this basically improves the efficiency of the financial institution. The financial institutions can also make new strategies and portfolios for the customers by using this huge amount of data.
Then comes the RPA that is the Robotic Automation Process. An Artificial intelligence technology that is created for the particular function of performing repetitive tasks is called Robotic Process Automation. This artificial intelligence technology called Robotic Process Automation is used to analyze a customer’s payable accounts and many more things. This increases the efficiency of these calculations as it takes less time and is more accurate in recording the information.
Blockchain is another emerging technology in the field of finances. This new technology has drawn the attention of many people and has attracted much investment towards this new form of financial transaction. Blockchain basically eliminates the need for a third party in order to avoid charges for a financial transaction. This is because blockchain is a decentralized method and hence does not require any third party for financial transactions.
The investments made for the improvement of financial technology have increased by 2200% in the last couple of years on a global scale. At first in the year 2008, an investment of 930 million United States Dollars was made in the improvement of Financial Technology and then it increased by a huge mark. It increased so much that the investment for the improvement of Financial Technology in the year 2015 became 22 billion United States Dollars on a global scale. So the investment in the year 2015 is more than 20 times the total investment made in the year 2008. This shows that how much financial technology is taking over the traditional methods of making financial transactions.
As said by the office of the Mayor of London, Capital city of Great Britain there is a nascent industry of Financial Technology in the city and that industry has been getting an unbelievably rapid amount of growth over the past few years. Out of all the workforce present in the Capital City of Great Britain that is London, almost forty percent of that total workforce has become an employee in the field of Financial Technology or FinTech.
Only in the continent of Europe, there have been investments of 1.5 billion United States Dollars to improve the Financial Technology in the year 2014. Out of the 1.5 billion United States Dollars the Financial Technology Companies in the city of London received 536 million United States Dollars, those companies in the city of Amsterdam received 306 million United States Dollars and those companies in Stockholm received around 266 million United States Dollars.
The city which received the highest investment in financial technology services is the capital city of Great Britain named London. Stockholm is the second on the list after London who has got the highest investments for Financial Technology Services in the last 10 years. The Financial Technology deals in the whole continent of Europe reached higher by five quarters, the rise was so rapid that in the fourth quarter of the year 2015 there were only 37 FinTech deals but by the end of the first quarter of the year 2016, there were 47 FinTech deals in the continent.
Lithuania took its big entry into the industry of Financial Technology in the year 2016. It was in this year of 2016 that Lithuania began its journey to become the new hub for companies promoting Financial Technology in the North of Europe. This started to happen when the news of the possibility of Great Britain exiting from the European Union was roaming around. Since the year 2016, the country named Lithuania has already launched 51 FinTech licenses. Out of these 52 licenses, 32 licenses were done in the year 2017.
All of these investments show that many tech companies are interested in the growth of Financial Technology because of the potential financial technology possesses. The use of financial technology makes banking or any kind of financial transaction more accessible to people all around the world. Financial technology companies are going to grow in the next few years rapidly and it has a great future ahead because statistics show that the growth in the investments for improving financial technology is going to increase. This is going to infiny companies to start providing such technology.
Conclusion
Hopefully, this article has helped you learn everything about Financial Technology and about the bright future of Financial Techn
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