Fintech, as the term itself indicates, is the mix between finance and technology, and it should be noted that it has been booming for a few years. Faced with the classic infrastructure of traditional banks, users demand to make the leap towards a digital world where transactions are more agile and, above all, where the user experience provides satisfactory value. This is where the new Fintech enter the scene, companies that have emerged from that need and that are offering financial services for both individuals and companies. The main boom in the Fintech sector has come mainly from the hand of applications aimed at the final consumer. However, the new wave of Fintech innovation is expected to have a major impact on the business world.

The Fintech sector in general is a sector that is experiencing exponential growth and the opportunities are limitless. By orienting the service towards the interests of consumers, whether they are companies or final consumers, FinTech have become the roadmap in terms of financial issues for the future. The banks will continue to provide the necessary infrastructure but given the loss of their clientele to the new FinTech, in some cases they are betting on acquiring different pioneering and successful companies in the Fintech sector. Faced with this situation, traditional financial institutions will have to rethink their future and evolve towards a more digital sector if they want to be, at least, on a par with the new Fintech companies, so as not to be left behind.

Although it has been many years since technology began to be applied in the banking and financial sector, the term Fintech began to be truly talked about, especially since 2008. In that year, the financial crisis hit very hard. Faced with so many loan requests from companies, the bureaucratic system, and the lack of agility in the granting of loans and other financial products, brought to light the problems that banks had in meeting the needs of users.

Given this, the new FinTech saw a great market opportunity and, starting in 2013, when the great financial crisis subsided, significant changes began to take place in the finance sector. During all those years, until today, Fintech companies have been growing, new ones have been founded, thus creating a considerably competitive market around the world and a completely new ecosystem.

Of course, the Fintech sector has undergone considerable evolution over time, especially in recent years. Fintech has been understood in different ways and the term has had to be adapted to the environment and needs of the moment.

We could mention PayPal as the first famous case of Fintech. The famous company founded in 2001 under the name of PayPal, which was originally Confinity until the merger in 2000 with X.Com founded by Elon Musk, allowed online payments through the internet between users and was presented as an alternative solution to traditional payment methods. A few years later Venmo was born, a company acquired by PayPal in 2012, which allows you to share expenses through the application and adjust accounts between users.

Another way of understanding the term Fintech would be with B2C neobanks, such as N26, Monzo, Bnext. Another clear example can be that of Revolut. The British company obtained a specialized banking license from the European Central Bank to be able to accept deposits and offer consumer loans. This license is not the same as that of traditional banks. These would have a full or full range license that allows them to provide investment services to their clients. Furthermore, Revolut initially started without any kind of license, creating a puzzle of financial services through banking infrastructure that rented the license to it.

Behind all these banking services that we mentioned, as in the case of Revolut, there is always an entity that provides financial services. From this, the term Banking as a Service (BaaS) is created, which consists of providing financial services to a company, in these cases, not a bank. BaaS is the basis of embedded finance, since it offers the infrastructure and technology so that third-party companies can provide financial and banking services through this infrastructure, which is integrated as if it were a “white label”. Not all companies can provide this type of service. Depending on the type of services, there are different types of licenses. There is an EMI (Electronic Money Institution) license that allows it to operate as an electronic money institution in addition to being able to offer loyalty cards, open accounts, etc.; Financial Credit Establishments that can only grant credits and loans, such as Cofidis; Payment entities that are authorized to make payments of all kinds: transfers, card payments, home debits, etc.

After the B2C Neobanks, some banks emerged in the field of companies or B2B. For example, in this field we can find companies like Qonto, Penta, and even large Fintechs like Revolut or N26 are starting to offer company accounts.

Finally, an area where we believe the Fintech sector will have a significant impact is in business-to-business payments and treasury management, where, supported by banking infrastructure, many platforms will be able to digitize and automate business payments and treasury management.

The future is uncertain. It is difficult to know where Fintech will evolve. The Web 3.0 sector is hitting very hard, and it is possible that they will play a very important role in the future. However, the change that occurs will be constant and not radical, since we are talking about technologies related to the financial field, which entails a significant degree of prudence when making any change. What is clear is that Fintech companies are here to stay and are becoming stronger due to their ability to innovate, their speed and their ability to adapt to a changing environment.

PayPal

It is one of the most famous companies to offer financial services. It allows you to make online payments between users, make payments to businesses, etc. It should be noted that it is not a bank, so it is not governed by banking regulations. It is considered one of the largest companies in terms of internet payments.

Revolut

The company founded in London is a challenger bank. It means that it has a banking license, but in this case specialized as we have mentioned in the previous point. In addition to offering a prepaid debit card, you can exchange cryptocurrencies, payments between people, currency exchange, etc.

Klarna

First created in 2005, it is a Swedish company that offers online financial services. It became popular for acting as a link between stores and customers, especially in Sweden. By presenting itself as a secure payment gateway between seller and buyer, Klarna offers security and speed to its users. Such is the success in Sweden that around 40% of e-commerce sales go through the company.

Wise

The British company Wise, which was created under the name of TransferWise in 2011, allows through its platform, whether web or mobile application, to make transfers between people and B2B.

Advice and asset management

Platforms that offer advice on wealth management that a person or company may have. Through automated procedures with the help of AI and complex algorithms, optimal solutions can be offered in terms of asset management that may be available.

Personal finance

With a visual and dynamic platform, consumers are allowed to manage their personal finances effectively, as well as offering financial products that are more in line with the situation at the time.

Alternative financing

This is embedded lending. Fast loans that are offered to individuals or companies if they can afford the required expenses. Even crowdfunding could enter this section as “social loan” or participatory financing.

Payment services

Traditional payment methods have evolved into a more practical and agile model. This is where wallets come into the picture with payments through mobile phones and electronic devices.

Cryptocurrencies

Practically everyone knows this term that has become popular in the last decade. After all, Fintech is also present in cryptocurrencies. In this case, cryptocurrency platforms offer the possibility of storing digital assets and being able to carry out transactions (increasingly) with them.

–Digitization:

Adaptation of financial services to the reality of the 21st century. Current demands call for platforms to be fully digital, with good accessibility and a satisfying user interface. Given this, it seems that the new Fintech are finding their way.

–Speed ​​and optimization:

Fintech response times are considerably faster than banks. It ranges between 10 and 48 minutes. If we only consider the movement to physical entities, time optimization is a very relevant aspect to be taken into consideration.

–Greater accessibility:

It results in further democratization of the financial world. A greater part of the population could be banked, since, with internet access, we could open an account, request loans, etc. The current need to go through the traditional methods of going to physical branches would be eliminated.

–New more efficient technologies:

The impact may not be noticeable now. However, we will soon be able to see the positive impact that digitization and the application of new technologies can have in reducing the material used. Cash is less and less requested and the same could happen with cards.

–Social exclusion:

We have talked about the benefits that the complete digitization of financial services could bring. However, the adult population that has grown in another era continues to demand the need for physical spaces with people where they can carry out their transactions. Given this, it may be necessary to take some progressive measure to have the entire population included.

–Digital = hackable:

Even if everything is stored digitally and in a secure way, it will always be potentially extractable by other people.

Finally, where is the Fintech sector headed? The answer is difficult. What we do know is that the Fintech revolution is here to stay, and with great force. The influence of Open Banking, and the European regulation PSD2 make the Fintech movement move forward. Open Banking will allow platforms of all kinds to offer financial services in any way. In other words, by passing the bank information to be the property of the company and not of the banks, the end user will be able to decide which Fintech to work with, and the Fintech will be able to provide previously unthinkable services. Open Banking is evolving towards Open Finance, that is, openness of all financial information. In the future, it is possible that it will lead to Open Everything thanks to APIs (embedded finance) since any application will be able to provide any type of service.

Thanks to Open Banking, Snab has been able to create a non-banking platform that allows our customers to access their information and banking movements from one place, centralizing all banking and treasury management in Snab, in a secure manner, and complying with all PSD2 regulatory standards.