Fintech is basically a blend of the words technology and finance, and is a broad category comprised of different companies who apply technological innovation to financial industries. For instance, software companies who develop and run online financial services are considered fintech. Companies that work on infrastructure design and building systems that allow for the transfer of money from one financial institution to another are also part of this group. While there is no definitive list of what should be classified as fintech, there are some industries which most certainly fit into the category.
Internet banking has definitely opened up the industry and given birth to a number of different fintech companies. PayPal, Google Check Out and Xoom are only a few of the internet-based banking companies which have grown substantially over the last few years. In addition, savings accounts, checking accounts, direct deposit, foreign currency, and a multitude of other options have also been added to the banking scene. Therefore, if you have an interest in these types of things, chances are that you could benefit financially from a financial services internet application.
Fintech investing is simply the practice of using financial instruments to make profits. The most popular investment vehicles in today’s day and age are stock investments, the growth of which can be directly tied into the success of specific fintech companies. For instance, stock in a savings account which is invested in a fintech company which deals in electronic payments can yield very high profits. However, stock in a savings account is not the only way to profit from fintech stocks and, as mentioned earlier, they can grow in correlation with the performance of the actual company.
The best fintech investors know that it is important to diversify their investments across different sectors and the best way to do this is through using payment processing services. Although it may seem like a simple idea, it is important to remember that these types of products usually require a great deal of processing work. It is in these parts, where the efficiency of the financial services provider really comes into play. The biggest problem with financial services and savings accounts is that they can take up a huge chunk of a business owner’s time.
A perfect example of the efficiency of fintech companies lies in e-commerce. E-commerce is an incredible convenience for anyone but it has a tendency to cut a small business owner out of the loop when it comes to dealing with payments and processing. If an e-commerce site doesn’t already have a merchant account, chances are it will soon after. This is where fintech companies can really help out because, as previously mentioned, they deal solely in electronic payments.
Fintech in the context of Chicago began in earnest in the mid-2000s with the development of something called CDNOW. This was an online marketplace for buying and selling digital currencies such as e-gold, e-silver, and e-bank cash. According to estimates, over two hundred and fifty thousand people have traded on CDNOW. One of the reasons Chicago became a hotbed for fintech was because of its reputation as a center for technology and information technology. Many young people were drawn to work at prestigious universities in Chicago, making technology a major part of their lives.
A prime example of fintech in action can be found at Nasdaq, where a business is either a seller or a buyer of digital currencies. Digital currencies are much like stock in that they can be bought or sold. The biggest difference is that instead of working with a conventional exchange, buyers and sellers to communicate directly with each other via a digital network. This direct interaction dramatically reduces costs, making Nasdaq one of the most efficient venues for fintech investment. As Nasdaq continues to evolve, it is possible that the roles of Nasdaq and Goldman Sachs will expand to include more traditional financial markets, including Goldman, though that remains to be seen.
With technology changing so rapidly, it is not surprising that traditional business models are not always able to keep up. As fintech gains a strong foothold in the financial world, new business models will emerge. The best thing to do when trying to determine what your new company should look like is to talk with experts in the field. Ask questions, read books, and watch demonstrations of existing platforms. The next logical step after figuring out what types of services you want your company to offer is to develop the technology that will be necessary to support it.