What is fintech?

You may have heard the word fintech in recent years. But it’s more than a buzzword. In fact, when you check your bank account balance online, send money to a friend with a cash app, or use your phone to pay at a store, you’re using services made possible by fintech.

So what exactly is fintech? In general, fintech is financial technology. It provides automated and convenient solutions to make finances simpler and more personalized. Read on to learn more about what fintech means and how it’s used.

Key takeaways

• Fintech is a common part of everyday money management, from budgeting apps to mobile payments. 
• Wealthtech, insurtech and regtech are categories of fintech.
• The goal of fintech is to improve financial services and cybersecurity and make finance more accessible.

Fintech refers to technology that streamlines traditional financial transactions for businesses and consumers. The term is a combination of “finance” and “technology.” Fintech can help make financial services more secure and efficient. 

Fintech includes a variety of products and services. One of the most well-known examples of fintech is mobile banking. Other examples include peer-to-peer payment apps, trading platforms and investment apps.

Fintech may seem new. But the concept could be applied throughout history as far back as the development of credit cards, the invention of money and beyond. In recent years, technology companies and innovation have led to making financial services more customer friendly.

Investments in fintech companies continue to grow, and since 2010 they have surpassed the $200 billion mark. 

There are multiple categories that fall under fintech. Even banks you might think of as “traditional,” are using fintech to offer more services and solutions. Some of the more well-known categories are ones having to do with wealth management, insurance and managing regulatory functions. 

As you can likely tell from the name, this is the wealth management and wealth-building form of fintech. Wealthtech includes companies and innovations that “disrupt”—or improve—the wealth management space, like robo-advisers that use software to provide investment advice. 

This fintech category uses technical innovation to make the traditional insurance business model more efficient. For example, you may be able to get an insurance quote online within minutes, instead of working with an agent. 

This is a unique fintech category that uses information technology to improve the way the financial industry manages regulatory functions. This includes tasks like monitoring, compliance and reporting. 

Those who use fintech include just about everyone: individuals, major financial institutions, regulatory bodies, companies, investment institutions and more. These can be business-to-business (B2B) or business-to-consumer (B2C) relationships. The fintech user base may be split into four main categories:

• B2B for banking institutions
• B2B for large businesses
• B2C for small businesses
• B2C for individual consumers

Whenever there’s new technology, it’s bound to change the way business or other activities are conducted. Here are some examples across a variety of fields.

With the digitization of modern finance, cybercrime can be a risk factor. Fortunately, cybersecurity and fintech are connected, as fintech can provide solutions to strengthen security and help prevent fraud. For example, unusual transactions may be flagged based on information collected about your typical payment habits.

Whether it’s through technology like mobile banking apps, budgeting software or online lending, fintech has helped make financial services more widely accessible. For instance, you might’ve written a check to a friend in the past, but now you can send them money immediately through a cash app. 

Robo-advisers are automated financial advisers. In other words, they are digital programs that offer investment advice or even create personalized investment portfolios. 

Fintech has become one of the hottest and fastest-growing segments in the financial services industry.  It helps financial institutions provide accessible and safe services. You may even benefit from fintech on a daily basis if you use mobile banking or a cash app.

Capital One strives to provide state-of-the-art fintech services through mobile money management apps and more. Learn how online banking services and CreditWise from Capital One can make your credit and banking experiences even more streamlined and convenient.