Financial technology, or fintech, is changing the way we think about money. The financial world has been disrupted by innovations that make it easier to find loans and invest your money. In this post, you will learn about some of the latest fintech innovations.
Blockchain
Transactions between two parties can be recorded in a digital ledger called a blockchain. Due to its decentralized nature, no governing body or financial institution is required to confirm or sanction financial dealings. According to John Mattera, blockchain is different because it uses cryptography, the process of transforming data into unreadable text that no one but the parties engaged in a transaction can read. In practice, this means that once data is stored on a blockchain network, it can no longer be altered or removed.
Financial transactions aren’t the only ones that could benefit from blockchain technology; any transaction involving multiple parties and multiple signatures, such as a real estate sale, could also use this decentralized ledger to ensure everyone’s information is safe and accurate. While there are many upsides to implementing such a solution, there are also some disadvantages to consider.
Insurtech
Definition of Insurtech – how technology is being used in the insurance sector. The industry is massive, but it has been hesitant to adopt innovative practices, in part because it is a complex market. When deciding whether or not to provide coverage, insurers must take many factors into account and should inform policyholders of the level of risk they are accepting.
There are a variety of ways in which insurance businesses might leverage technology:
- They can improve customer experience through better user interfaces and more personalized recommendations based on past behavior
- They can increase efficiency by automating manual processes (like claim processing) using artificial intelligence aka AI algorithms
Robo-Advisors
Robo-advisors, or automated investment advisors, are websites that help you invest your money using computer programs. They are more cost-effective than human advisors and may be utilized for both investing and retirement planning, according to John Mattera. Robo-advisors have several benefits, including the fact that they are more cost-effective than human advisors:
- Convenience – Fill out an online questionnaire about your financial condition and aspirations to get recommendations from a computer system without having to meet in person or talk on the phone with someone who doesn’t understand your needs and goals. Getting expert assistance with personal financial management is now more accessible than ever, even for those with full schedules.
Crowdfunding
Crowdfunding is a method of supporting a project through the contributions of a large number of individuals. Crowdfunding has grown in popularity among new businesses because it allows them to launch without having to approach traditional funding sources like banks or venture capital firms, which may require a return on investment aka ROI, in the form of equity ownership in exchange for providing startup capital.
These companies don’t sell equity in exchange for funding but rather appeal to the general public in the hopes that some of them will be moved by their product or service idea and donate to the company’s launch.
Microfinance
To provide poor people in developing countries with access to small loans is to engage in microfinance. It’s a type of microcredit, which is a system for providing people with a way to borrow very small amounts of money from financial institutions at very affordable interest rates. Because it provides financial assistance to those who can most benefit from it, microfinance can be considered a form of charity.
