Fintech is a term currently defined as the union of the digital and finance worlds with the aim of creating the whole market of digital financial services accessible to as many people and companies as possible.

The Fintech concept includes the digitization of the financial sector; all those companies use new technologies in order to offer financial services in a simpler way than those currently offered by the banks.

Its attractiveness comes from the use of digital media to offer new responses to users of financial products, basing its virtues on simplicity, agility and security of its operations.

Fintech Startups are creating a new perspective within the financial market.

This type of services gradually takes an important part in our society, facilitating banking services through intuitive and more understandable applications for the users. Simplicity, agility and security are the keys to these new services.

 

How do they improve the financial system?

 

Fintech Startups not only provide the financial market new competitors and an alternative to traditional financial institutions, but also transform the way in which the consumers interact with and access to all kinds of financial products. That is because of its accessibility or ignorance was unknown previously.

This new approach and its accessibility of financial services is possible thanks to the technological support behind the Fintech ecosystem, especially in designing pleasant, accessible and attractive applications, and the user interfaces by which Fintech Startups offer their products to the client ‘’by the click of a button’’.

Thanks to Fintech, so-called democratization of financial products has been achieved, by making it available to the final consumer in a more simplified and accessible way. Otherwise a number of products would not be known or accessible through traditional banking.

This must be related to the offer of a good use experience and access to the user. In general terms Fintech Startups offers more specific and personalized products, translated into personalized attention to the needs of user.

Another and the most direct advantage of Fintech Startups stars is the savings and reduction of the cost of services, especially those small costs derived from procedures and processes. Furthermore, this cost saving does not include only the financial management section, but also it includes aspects such as cost of the user travel to the bank’s office or being subject to the entity’s schedules. The service is now available 27/7 from your smartphone. Fintech companies introduce us to a new paradigm of managing our money, in a comfortable, accessible, transparent, and above all, fast way.

 

Types and its characteristics

 

Fintech Startups are dedicated to offer intermediation services in the world of finance in multiple way; from money transfers, loans, access to the currency, cryptocurrency market, stock market, and investment markets.

The scope of the Fintech market means that the types and services realted to them are being created every day. Currently, the most common are:

Payment methods

Thank to these Apps we are able to pay in all kinds of shops and establishments, without physical money or credit cards. Its eclosion coincides with the PSD2 Directive entry into the force and they are usually found as the means of payment associated with a bank card or directly from our Bank Account. An example of this App if Wayapp Pay.

Fund transfers

Fintechs that specialized in funds transfers and money transactions focus on efficient and agile way, with lower transfer costs than traditional banking, even free. Paypal was a pioneer in this fields and its path is followed by Fintechs such as Bizum.

Investment

These Apps offer to the user a friendly environment to access investment markets, business or companies. It enables the access not only to traditional investment, but also investment in micro-markets created by Fintech. The user can access it to invest, or as an entrepreneur to use this medium to finance themselves.

Financial advice

They are known as Robo Advisors. These Fintech companies base their technology on automation and machine learning to offer financial advice to SMEs, Starups or private consumers in general, but at the same there is a certain degree of personalization.

Personal finance

These Apps aim to inform the user in a simple and accessible way about their personal finances: income, payments, direct debits, savings, breakdown of expenses… Lately, they tend to be integrated into other Fintechs, such as banking Apps. However, they are also autonomous such as the famous Fintonic.

Loans

Outside of highly demanding and controlled scope of bank credit, the new ways of offering loans to consumers and companies has been emerging.

P2P loan

Loans made and offered directly between Fintech users, with no intervention of third parties (banks or credit agencies). These Fintech companies postulate themselves as mere intermediaries that make a loan platform available to the public.

Crowdfunding

The digital crowdfunding. Crowdfunding is a collective network financed by financial donations to finance a certain company or project in exchange for a benefit, which range from obtaining a participation in a project to obtaining early access to the final product/ service or even a simple thank you.

Crowdlending

Crowdlending is a form of financing companies and projects, also distributes, but instead of offering products, services of participation in the company, it offers the return of the invested capital in addition to an interest. It allows financing through a financial community without resorting to traditional financial services. In addition, enables the access to a great number of investors.

Distribution of Financial Products

The aim of these Fintech is to group financial offers by sector and offering disaggregated and segmented information to their users for contracting their services, showing the main characteristics, advantages and disadvantages of each product on the market.

Financial comparators

Comparison of financial products such as loans or mortgages. They offer basic information on the operation of each product and company in the market.

Lending comparators

Comparators that base their operation on algorithms which directly identify the advantages and disadvantages of the offer of the lending loan platform.

Real Estate Supply Aggregators

These collaborative economy platforms index the real estate offer, by creating a portfolio of real estate assets and it enables the user to make investments in real estate.

Currencies and Cryptocurrencies

These Fintech companies make available to the general public the possibility of investing in the currency market, by informing the user about the prices of each currency, its evolution and the different markets to go to.

These Fintech companies can be dedicated to the traditional currency market or to the new cryptocurrency market based on Blockchain technology. In the second market, Fintechs may also incorporate means of payment associated with cryptocurrencies and so-called digital wallets.

Neobanks andChallengerbanks

Fintechs which offer the services of traditional banking, but exclusively through mobile and digital platforms, without having a physical presence in the form of branches.

In the case of Neobanks, they are entities that are behind or associated with a traditional bank, by creating their Digital model in parallel thanks to this support.

In the contrast, the Challenger banks are Fintechs that operate through a Banking License, they are purely digital banking entitles protected by the Deposit Guarantee Fund and subjected to banking regulations in line with the technological innovations that Fintech implies.

Insurtech

Insurtech is the phenomenon of the transformation of the insurance market adapted to the new Fintech technological environment.

These innovative Startups offer risk assurance services on the technological basis of Blockchain, Bid Data or Cloud Computing in order to generate the insurance products, as well as managing them.

From all of the above, we can see that the Fintech Sector continues its expansion, by offering new services and possibilities every day to improve the users experience and financial capacity.

Letslaw is a law firm with the professional lawyers specialized in advising the Startups and Fintech, as well as data protection, digital law and intellectual property.