Financial technology

Financial technology, also known as fintech, refers to technology that aims to improve and automate delivering and using financial services. Examples of fintech applications include roboadvisors, payments apps, peer-to-peer (P2P) lending apps, investment apps, and crypto apps. The term "fintech" initially referenced the use of computer technology applied to the back office of banks or trading firms but now describes a broad variety of technological interventions in personal and commercial finance.

Financial technology comprises several subindustries: paytech, wealthtech, capital markets technology, and insurtech.

Paytech, a term coined in 2018, is short for payment technology. Paytech is developing new ways to make contactless payments through applications on mobile devices, cryptocurrencies, and even wearable technology.

Wealth management technology is the digitalization of financial investing. Wealthtech is considered a disruptive technology as it provides consumers with tools to become their own financial advisors. Many investment firms are working to integrate this technology to better serve their clients and expand investment portfolios.

Capital markets technology is a broad term used to describe technology and services developed to support the technology needs of capital firms. Capital market technology leverages cloud computing services for the investment banking industry, aiming to introduce various improvements in digital banking operations.

Capital markets technology is similar to wealthtech; however, it provides a much larger frame of data to its users and customizable APIs. This technology is often paired with AI systems capable of detecting upcoming market trends and providing suggestions regarding how they should be addressed. Many capital market technology companies' capacities include CRMs, analytics, risk calculations, and more as part of their product portfolios.

Technologies that are influential in capital markets include cloud technology, open architecture, artificial intelligence, mobile computing, and blockchain. Capital markets firms' reliance on digital technology has increased in response to global challenges, such as increased competition from financial technology firms, fee compression, compliance concerns, aging IT infrastructures, and customer relevance and churn. Technology aids these companies in multiple ways, including the following:

• Service and client retention: real-time analysis of customer behaviors aiming to inform future product and service launches
• Automation adoption: AI-based systems aiming to leverage human workforce and machine usage
• Deployment of open APIs and services: general improvements in customer service and product development and release
• Adaptation to changing market conditions: technology can help companies and organizations adapt to evolving market conditions

Insurtech is short for insurance technology. This sub-sector of fintech utilizes data to leverage savings and profit for insurance companies and their customers. Many insurance companies have employed deep learning AI systems to remove the need for a broker entirely, allowing a fully customized mix of policies to complete a consumer's insurance coverage.

Fintech has several technology components; however, some of these components play a more significant role in the overall success of the industry. The technologies comprising fintech are as follows: application programming interfaces (APIs), distributed ledger technologies, and cloud-based delivery systems.

Application program interfaces are a low-cost solution to software development. APIs are constructed as a set of reusable functions, procedures, and various tools. They allow for multiple applications, independent of language, media, or application type, to communicate seamlessly, enabling users to personalize and streamline their multi-application experiences. In addition, APIs enable users to access the core code components and build new applications while maintaining ownership of the resulting application.

Distributed ledger technology systems are a type of ledger system that has multiple points of data collection synchronized across multiple sites, geographies, and institutions, allowing access from multiple locations. This system has no centralized location where data is stored, making it less vulnerable to cyber attacks and hackers. Additionally, each person with access has their own copy of the ledger that updates in real time, allowing any discrepancies to be managed efficiently. Distributed ledgers utilize the same technologies as blockchains, which are used by BitCoin as its ledger system. Using a distributed ledger eliminates the potential for human error, providing clients with real-time data.

Cloud-based delivery systems are used for their benefits of greater storage capacity and faster data computation and management compared to a single central server located onsite. Companies operating online require server capacity that matches the potential server load as a sudden influx of users can overload servers, causing delays and unsatisfied consumers. Companies such as Amazon and Microsoft are providing cloud-based delivery services to companies and organizations of all sizes around the world.