Financial technology is a rapidly growing industry, which aims to effectively compete with traditional financial instruments in the provision of financial solutions. It is a fast emerging market, which makes use of the latest technologies to enhance financial activities. The main feature of financial technology is making financial instruments more convenient and effective so as to facilitate better business transactions at a lower cost. These are mostly traded on global markets. Financial instruments include financial spread betting, equity derivative instruments, interest rate derivative instruments, financial markets and foreign exchange markets.
One of the main reasons for the emergence of fintech industry is advancement in information technology. Many financial institutions have begun adopting advanced systems to provide financial services and minimize risks. With the introduction of cloud computing, adoption of mobile apps and social media networks, demand for online trading activities has significantly increased. Moreover, due to stiff competition and lack of trust in mainstream financial services, startups looking to provide innovative financial solutions have increasingly looked to alternative sectors.
One of the most prominent features of fintech industry is the innovation of bank accounts. Most of the mainstream banks have already adopted online banking and providing online banking services like mobile banking etc. However, there are still a few countries that do not offer online banking or mobile banking services. These include India, Singapore, China, Indonesia, Malaysia, Philippines and others. There is a great need to provide these services to these countries as most of these countries do not have bank accounts.
Another innovation is the online lending. Online lending is a fast-emerging field of financial industry. Online lending provides an environment that is highly convenient and friendly to customers. Fintech companies focusing on this field are expected to experience great competition in future.
There is also a need for fintech companies providing mobile solutions. The primary reason for mobile transactions is the lack of access or poor connectivity. However, the use of smartphones devices has provided a platform for users to send and receive money from anywhere around the world. The presence of the decentralized ledger called theblockchain is also playing a vital role in increasing speed and decreasing cost of trade and financial services in the biotech industry.
A fourth innovation is the online buying and selling of financial products or services by consumers. This type of service is known as e-commerce. One example of an e-commerce application is the stock trading app. The main advantage of this service is its low cost and hassle free approach to trade in stocks, options, futures, currencies, commodities, etc. Online shopping has become a hot option for buyers and sellers from the US and other developed countries. Fintech companies are focusing on providing mobile wallets like Telemoney and CircleUp to facilitate online buying and selling of their financial products.
Financial services have a long term competitive advantage when compared to other business models. Apart from the growth of the biotech industry itself, this has provided a new opportunity for other players to enter the market. As a result, competition has increased between these fintech companies. These companies are using different strategies to gain market share. Market research has revealed that the market penetration of fintech stocks in USA is just 3% at best.
There is a need for government regulation to support the expansion of the biotech industry in the United States. According to experts of the decentralization movement in the US, there are two viable options to reach the common market: either through blockchains or through the traditional legal system. Blockchains can be seen as the platform of the future financial technology. The advantages of this technology include speed, lower costs, and increased safety. Experts of the decentralization movement believe that regulation should be carried out by stakeholders such as state agencies and courts, rather than by central authorities such as the Federal Trade Commission.