Technology is the future of the banking sector. Discover in this post what a fintech is and how they can contribute to our SME's finances!
In recent years, technology's relationship with financial companies has revolutionized the industry. Digitalization has changed the way people relate to money and finance.
As a result, financial institutions have found it necessary to join this digital trend, giving way to fintech. This type of company has been gaining prominence over time. In fact, according to a study by Finnovating, a global platform for open innovation strategy, at the end of 2019, there were only 385 fintech start-ups in Spain. This number continues to increase and today, fintech represent 5% of the banking sector.
But what is a fintech? We'll tell you about it below!
What is a fintech?
The term fintech is nothing more than the union of the English words finance and technology. But beyond its etymology, we can define fintech as companies that offer financial services such as payments, transactions, online banking and advice, development of financial security systems, market trading and crowdfunding, among others. All this through technological means and in an accessible and agile way.
In other words, a fintech is a company that offers financial services through digital means and the use of technology. Some of the best known fintech companies in Spain are: Pagantis, BN-XT, fintonic, Returnly, RavenPack, buguroo, holded, among others. Fintech can operate in various markets and audiences and offer diverse advantages.
What can fintech companies bring to SMEs?
Depending on the type of service or product offered by the fintech company, the benefits may be one or the others. However, the following are the advantages that all fintech tend to provide, regardless of their field.
- Automation of the management of financial and administrative processes online.
- Simplicity and security when managing personal finances.
- Optimization of transactions, payment processes and online banking.
- Development and implementation of collaborative actions of collective financing (crowfunding).
- Access to the benefits of financial institutions for unbanked customers without intermediation costs.
- Democratization and simplification of access to financing.
Now that you know what fintech are and what they contribute, you may ask yourself, what is the difference between fintech and traditional banking? We will tell you about it in a moment!
Difference between fintech and traditional banking
Fintech and traditional banking have the same regulatory framework, which means they both work under the same rules. And, although fintech were initially seen as competitors to banks, the differences between the two have narrowed considerably in recent years. This is due to the digitalization of banking and the fact that fintech have proven to be great allies of this sector in offering innovative products to customers.
Fintech can bring new ideas and banking institutions have the capacity to massify them.
However, there is currently a clear difference between traditional banking and fintech. While traditional banking focuses more on solving the user's global problems and therefore offers a greater number of products, fintech usually offer only a professional service or specialized product through technology.
Aspects to consider when hiring a fintech company
The use of technology in financial services can provide many benefits for users and digitalization. However, as when hiring any service, there are some aspects that we must consider when hiring a fintech
- Make sure that the company complies with all legal requirements and the corresponding authorization to offer its services.
- Verify that the company you are hiring has the necessary security and protection measures for data processing.
- Know and research well about the fintech services you want to hire, regardless of whether they are very attractive or innovative.
- Certify that the technology offered by the fintech is sufficiently mature and developed to avoid possible risks.
In conclusion, the application of technology in the financial sector can lead to significant improvements and innovations that allow new types of services to emerge that are more adapted to the needs of users.
And now that you know more about fintech, would you like to hire the services of one?