The FinTech Boom
FinTech boom is here and it is one of the most exciting areas in tech. Industry watchers would not be oblivious to the sudden sprouting of Fintech startups across the globe. Asia alone has around 2,500 while U.K. and U.S. have a combined total of 4,000 FinTech startups. These offer tech-enabled currency exchange, crowd funding, payments, online lending and wealth management services. That’s right – from paper and plastic, our money has already become a computer code. But what caused the boom?
The horror story of 2008’s credit crisis. While the banks dealt with new regulations and heavy penalties for non-compliance, the smart brains noticed the vacuum for innovation created in the space. FinTech startups erupted which could avoid the structural formalities of a bank while offering efficient means of financially serving a customer. In any area, in any industry. They are also attracting sizeable investments. Since 2010, more than $24 billion has been invested worldwide. Around $11 billion of that number was invested in the first three quarters of 2015. Here is a financial snapshot of the FinTech sector for 2016:
Managing to buck the trend, FinTech startups have surprisingly challenged the traditional financing platforms – especially those that toyed with the idea of crowdsourcing and hit it off. MotoFunding is one example of a crowdfunded platform, which offers alternative investment option. Virtual Force helped create the online marketplace that facilitates borrowers in raising finance to purchase a vehicle. MotoFunding offers investors an opportunity to invest in these asset-backed loans. Overall, the investors experience higher returns, borrowers lower the cost while both enjoy the hassle-free digital experience. Moto Funding’s simplicity of the whole process beats the complicated webbed structure of a classic financial institution. The former takes a few clicks while the latter could take up to days to serve you.
But perhaps the beauty of FinTech lies in how it has opened up a sea of possibilities for industries that have stayed underbanked for years, with crowdsourcing. As an industry, Agriculture’s potential has been dwarfed by limited financing options for its farmers and produce distributors. A FinTech startup ProducePay innovatively solves this dilemma. ProducePay improves cash management throughout distribution channels allowing growers to receive cash for their goods the very next day. It serves as a new medium through which farmers and distributors could manage shipments in real-time. As a result, they unlock their value faster than under traditional payment arrangements.
More disruptions have been created by startups combining FinTech with the Healthcare industry. Crediyo is a great example of alternative investing facilitator of just that. Crediyo allows the users with low-score credit history to get loans. It also offers billing discounts from panel hospitals while projecting the lifetime view of the loan divided into monthly payable amounts and options.
The future of FinTech startups is bright enough to overshadow the traditional brick-and-mortar financial institutions and the way they offer their services. Since the investment is rising, FinTech businesses are expected to grow exponentially and revolutionize the way we bank.
Having said that, it is also true that FinTech startups have to go through high tides before their ships are stable. Regulation is a huge barrier for many FinTech companies that want to establish themselves globally. Legal fees in filing and applying for licenses can be daunting for companies at an early stage. As compared to U.S., Singapore and U.K. are implementing friendlier rules for FinTech startups to harness their development. Hopefully, the others will follow suit.