The emergence of financial technology companies (FinTech) –companies whose line of business combines software and technology to deliver financial services – will reshape and improve finance by cutting costs and expanding access to financial services. FinTech companies can create a more diverse and stable credit landscape by gathering data from social-media and other sources to assess the needs of young businesses and borrowers on the fringes of the banking system.
From payments to wealth management, from marketplace lending to equity crowdfunding, a new generation of startups is emerging within the FinTech sector. There are several factors that help explain FinTech’s emergence as a growth sector, including technology (social networks, big data), a favorable regulatory environment and demographics that may give FinTech options an increasing advantage over traditional financial services.
The infrastructure needed to support a vibrant FinTech sector includes telecommunications and widespread electronic payment acceptance. Big-data-supported credit information systems, consumer education programs and sound and efficient regulation that support innovation and provide sufficient consumer protection are also important.
Wireless technology is permitting the leapfrogging of financial services over outdated telecommunication infrastructure. For many FinTech services, smartphones and access to broadband connections will be the big catalyzers of FinTech adoption. Consumers will more quickly embrace FinTech innovations following broader retail level acceptance.