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FinTech Frequently Asked Questions – ITChronicles

FinTech FAQ

Is PayPal a Fintech?     

Yes, PayPal is a fintech or financial technology platform — it clearly fits the definition of any business that offers online or integrated financial services (such as banking, credit, insurance, or investments) primarily through the use of technology. In fact, it’s one of the biggest players in the fintech market.

PayPal was launched in 1998, offering payment processing services in direct opposition to global financial giants like Visa, MasterCard, and Amex (American Express). The platform offered a cheaper price point for merchants than these and other conventional payment processing systems. And in 2002, PayPal had its Initial Public Offering (IPO) and immediately grew 55%, scoring the biggest gains amongst newly listed companies on the NASDAQ index.

Will Fintech replace banks?

Fintech has several advantages over traditional banking institutions that allows operators to be more innovative and to deliver services to their customers more quickly and cost-effectively. This has enabled fintech to shake up and disrupt the financial services industry.

But it’s actually unlikely that fintech will replace traditional banks. For one thing, banks and established financial institutions enjoy a much greater degree of trust and loyalty from their customers, which has often been built up over many years.

In addition, the trend in the financial market is now towards partnerships between traditional banks and fintech companies. The banks gain technology and new methods of service delivery, while the fintech operators gain access to an established customer base and extend their reach.

What is Blockchain FinTech?      

A blockchain or distributed ledger is a decentralized database that exists in identical copies on devices all over the world, belonging to all the people who are part of that particular blockchain network. Each user has equal rights to view and access past transactions and to make changes to the database by initiating a transaction, which is then stored in the database and becomes visible to all the other users.

In this manner, a blockchain has the ability to permanently and transparently log transactions of information — whether they be cryptocurrency transfers, exchanges of contract documents, or whatever. Once complete, each transaction is permanently stored in the database (the word “immutable” is often used in this context), and can then be seen and accessed by any member of the network.

Crucially, each transaction on the blockchain occurs directly between two or more parties, without any external entity being involved. This means no banks, clearinghouses, or transaction fees are necessary.

What are the top Financial Technology companies?

As of May 2020, the top fintech companies in the world include the following:

Adyen: Based in the Netherlands, Adyen serves over 4,500 businesses, processing mobile, online, and in-store payments. Clients include Facebook, Uber, Netflix, Spotify, L’Oréal, Burberry, Symantec, and Microsoft.

Ant Financial: Based in China and an offshoot of the Alibaba Group, Ant Financial runs Alipay, Ant Fortune, Ant Financial Cloud, and other financial services that cover wealth management, credit reporting, private banking, payments, and cloud computing.

FinTech Frequently Asked Questions

Avant: Chicago-based Avant is an online lending platform that uses proprietary software to rate the eligibility of customers for unsecured personal loans and credit cards, at interest rates ranging from under 10% to 36%.

Klarna: Sweden’s Klarna is one of Europe’s largest banks, but presents as a shopping platform that uses its proprietary software to evaluate customers at the point of purchase. Klarna makes its money by charging merchants a small transaction fee and by charging users who choose its installment payment plan.

Oscar: US-based health insurance company Oscar uses digital technology to provide a quicker and more transparent medical claim process, at a reasonable cost. Its financial backers include Fidelity, Google Capital, and Khosla Ventures.

SoFi: San Francisco-based SoFi offers student loan refinancing, mortgage loans, personal loans, wealth management, and life insurance. In 2019 the company introduced a product called Stock Bits, which lets consumers buy and sell fractional shares of 50 popular stocks for as little as $1.

Xero: Based in New Zealand, Software as a Service (SaaS) provider, Xero develops easy-to-use online accounting software for small businesses. Products include a full accrual accounting system with cashbook, automated daily bank feeds, invoicing, debtors, creditors, sales tax, and reporting.

Is Bitcoin a FinTech?

Yes — one of the factors that first propelled financial technology or fintech into the public consciousness was the development and trading of cryptocurrencies, of which Bitcoin is probably the best known. Bitcoin was also the first widely recognized application of blockchain technology.

Bitcoin is FinTech

Bitcoin was created in 2008 and announced through a white paper that was published in a forum online under the alias Satoshi Nakamoto. The Bitcoin network contained rules to determine the validation of transactions on its blockchain ledger and the creation of currency in the system.

Bitcoin employs a “proof of work” system, which involves “miners” solving complicated puzzles. The mining process also creates new Bitcoins. The network is self-regulating and makes sure that someone solves the puzzle and mines a block roughly every ten minutes. You can buy Bitcoin from online exchanges like Coinbase, Kraken, or Poloniex, by setting up an account and paying with your debit or credit card

Who uses Fintech?

These days, the short answer is almost everyone with internet access. If you use a payment platform like PayPal or Google Wallet, that’s fintech. Crowdfunding companies like Kickstarter, Patreon, or GoFundMe are other everyday examples.

Online and via mobile apps. Consumer-level fintech is everywhere, in the form of budgeting software, on-demand financial advice powered by Artificial Intelligence (Robo-advisors), and more specialist financial services such as automated insurance (insurtech), investment, and wealth management applications (WealthTech).

Fintech platforms cater for transactions between businesses (Business to Business, or B2B), and between businesses and their consumers (Business to Consumer, or B2C).

What jobs are in Fintech?

Fintech uses disruptive technology that streamlines existing services, makes new financial services possible, and enables companies to automate repetitive tasks. This technology requires developers and managers with specialist skills and is creating jobs in a number of areas.

Cybersecurity professionals are in big demand, as fintech operates on the foundation of digital and cloud-based technologies that can prove vulnerable to malicious actors. Security professionals must take responsibility for evaluating vulnerabilities, investigating incidents, and creating response plans in the event of security breaches.

FinTech developer

Blockchain developers must use programming languages such as Python, C, C++, C#, Go, Node.js, Java, and JavaScript to design, build, and launch blockchain technology in line with the requirements and business models of different organizations.

As regulatory environments change and new partnerships form between traditional financial institutions and fintech operators, compliance and risk control managers are being hired to analyze, prevent, and mitigate risks, including regulations, operations, and crime. 

Quantitative analysts or “Quants” are being recruited to guide securities firms, investment banks, and hedge funds in making informed decisions about markets, pricing, and financial risks, as they implement their complex trading programs. These analysts are specialists in math, data science, finance, and application development.

And as Artificial Intelligence (AI) and Machine Learning (ML) take on increasing roles in finance management, machine learning engineers, data scientists, developers, and researchers are entering the fintech sector to manage, develop, and oversee these projects.

How do I start a Financial Technology career?

For anyone looking for a career in fintech, a combination of technical and business skills is essential.

A general management skillset, including sales, relationship management, finance, marketing, analytics, and product management is appropriate for candidates who’ve set their sights on launching a fintech startup. This could include anything from developing a mobile app to setting up an online store.

Business acumen and an ability to speak the language of financial services should be part of the package that any candidate wishing to pursue a career with an existing fintech company should bring to the table. A strong grounding in the STEM disciplines (Science, Technology, Engineering, Mathematics) and some experience with programming languages and writing code would be a plus.

How do banks use Fintech?

Banks are using financial technology to make access to cash and credit easier for their customers. Financial institutions are using digital tools like chatbots to enhance the customer experience, mobile apps to give consumers real-time access into their finances, and machine learning algorithms to secure against fraud.

Several banks have introduced AI-powered virtual assistants to give users text and voice-enabled platforms that can automate payments, deposits, transfers, and other transactions. They can also offer detailed information in response to queries and requests.

Behind the scenes, banks and other finance institutions are engaging the services of fintech providers for security and protection against fraud, and for assistance in remaining compliant with industry regulations.

How do I learn Financial Technology?

To familiarize yourself with the technology, it’s a good idea to actually use it. For example, if you have an interest in cryptocurrency, create an account on an exchange, and start investing or trading. Likewise, you could do some preliminary research on a software or service area that intrigues you (TED talks, blogs, online reviews, etc.), then take a trial version of the app for a spin.

From a work experience standpoint, you could begin by working for a traditional company in the specific sector of fintech that interests you to get familiar with the finance side of the business. While doing this, attend fintech events in your area of interest to identify what’s being addressed by traditional finance companies and what’s not being addressed. With an understanding of the issues — and having identified the fintech operators who are currently addressing them through innovative technologies — you can plan your next step.

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