Financial Technology, also known as FinTech, is considered as a potential key to the global ascendancy of finance and the digital economy is a new driving force in the sustainable development and high-quality growth of the global's economy.
FinTech stimulates the development of the world market, mainly by promoting technological innovation.
So, what is the nature of the relationship between FinTech and the Global Economy? I will try to explain it in the following article.
Table of Contents:
Introduction to FinTech and Industry Growth
Financial Technology refers to the use of technology to deliver financial services and products to consumers. This can be in the areas of banking, insurance, investments, in fact, everything related to finance. According to the Allied Market Research, the rise of online banking and mobile platforms has created a $110.57 billion in 2020, and is projected to reach $698.48 billion by 2030, growing at a CAGR of 20.3% from 2021 to 2030.
Financial technology has advanced quickly since the advent of the internet and mobile devices. Fintech currently refers to a broad range of technological advancements in personal and business finance, as opposed to its original meaning, which was the employment of computer technology in the back office of banks or commercial firms.
FinTech has been known in various forms since the very beginning of the 20th century, at that time we could witness the first innovative solutions implemented with the help of FinTech such as the first ATM, online banking, or platforms such as PayPal.
But those were only examples of FinTech solutions, for more, I encourage you to read our article "Top FinTech Companies to watch in 2023" in which, various financial technologies were introduced.
FinTech provides many payment solutions. Plenty of firms from the FinTech sector are offering various financial services such as credit card payments, debit card payments, digital wallets, bill payments, merchant cash advances and other similar banking services.
All from above, payment solutions have a statistically significant positive effect on customer experience, what increases comfort in use of financial technology.
Nowadays, innovative payment methods, such as biometric characters, are implemented to slowly replace cards, telephones, smartwatches, mobile devices, ECT.
IBAS World is currently working on developing a method enabling digital payments even without biometric signs.
#IoT Technology and Blockchain
Both the Internet of Things (IoT) and Blockchain have had an impact on the world of financial solutions.
The capabilities of banking and financial applications could be greatly increased by IoT. For instance, a linked security camera installed inside a bank can spot any unusual customer behavior or potential security flaws and immediately alert the appropriate authorities.
In terms of Blockchain, it is considered as a one of the most secure methods of managing the technology database, regardless of the area, because it is capable of recording every single change, data transfer and data adjustment effort. Blockchain ensuring maximum transparency of all activities, while completely preventing the deletion and manipulation of any data.
Gamification encourages consumers to utilize the app more frequently. For instance, several financial apps reward users for completing particular tasks by giving them money or points. As a result, their entire experience with the product is enhanced by encouraging them to check in and take part in the game.
A good example of a FinTech gamification platforms is CreateCoin developed by Railwaymen. It is a revolutionary mobile application designed for people familiar with cryptocurrencies and allows users to reward those who share their ideas and opinions with virtual currency.
The Regulatory Technology holds the key to process automation. It is used to check that all business documents adhere to statutory law requirements. Regulatory technology is made to find any problems in the documentation that don't follow the regulations and fix them, so they function with the relevant system.
RegTech makes sure that data is secure and alerts users and bank staff to potential misuse. Additionally, it enables enterprises to interact with their regulators to guarantee smooth data transfer, compliance oversight, and financial crime investigation.
Instead of utilizing traditional computer coding, low code platforms (LCPs) let users and developers create programs with graphical user interfaces and settings. The platforms, however, still in their infancy, have the potential to do away with the need for expensive and limited software expertise.
Cloud computing is a type of computing that uses remote servers rather than local ones. It enables users to gain access to information and software via the Internet or other distant networks.
Businesses have an on-demand option thanks to cloud computing, allowing them to access resources and services as needed. Companies are using it increasingly frequently as they want to gain flexibility in their technology investments and cut costs associated with on-site deployment. Moreover, cloud computing can aid in the development of a more adaptable organizational structure that enables businesses to react swiftly to consumer demands and market changes.
#Artifical Intelligence and Machine Learning
Technologies such as Artificial Intelligence or Machine Learning are used to detect various irregularities. Their task is also to act according to specific typical patterns without human intervention.
The biggest advantage of AI and ML is the ability to control fraudulent transactions and ensure financial security.
The financial sector is gaining from artificial intelligence in a variety of benefits, including better customer service, risk management, fraud detection, and investment management.
The traditional banking system which includes financial institutions must first overcome challenges including integration, data privacy, data analytics and security, bias, legislation, and a lack of knowledge and acceptability in order to fully utilize the advantages of AI in the development of the FinTech business.
How FinTech is impacting the Global Economy
FinTech is impacting the Global Economy, and it is definitely revolutionizing banking sector and commercial banks activities in many ways.
Traditionally, in mainstream economics, consumption and investment demand, domestic and foreign, are considered to be the main drivers of economic growth in the short term. In the long term, on the other hand, sufficient supply and efficiency of production factors.
With the use of the use of GDP growth data and unemployment rates as measurable fastened with the last 3 years, it can be said that countries and regions with more advanced development of the financial sector of technology have experienced rapid expansion at the rate of GDP growth and recorded stronger recovery of employment.
FinTech raises labor productivity, which refers to output per worker or per hour worked, and definitely fosters economic growth. It has a significant favorable regional and provincial effect on GDP growth in every country. In actuality, the unemployment rate is lower the more established and developed the nation's fintech ecosystem is.
With the help of communication technologies development and platforms like mobile phone applications and other digital mediums, FinTech makes it simple and convenient to supply and consume financial services. Thus, a positive contribution of FinTech can be seen in innovations that it is offering. It is possible to observe how, for example, micro investment increases economic growth and how those investment drives fintech and economic growth as well.
The problem that might hinder economic growth is that a significant proportion of the world's population doesn't have broadband access to mobile devices.
Leading countries in the FinTech area
#United Kingdom (UK)
Since 2012, the UK's FinTech sector has received over $2 billion in venture financing and over £100 billion through mergers and acquisitions from financial services firms. The UK has one of the most technologically advanced financial services industries in the world as a result of these investments. The UK government also makes significant investments in the FinTech industry through funding programs and regulatory changes that make it easier for fintech businesses to operate. It can be said that basically, investment drives economic growth.
Currently, there are over 2,500 companies in London offering products or services created using financial technology. Thanks to innovations, UK obtain higher economic growth.
#United States (US)
It plays a key role in the US economy, as evidenced by more than 50% shares in the global FinTech market. Fintech has been seamlessly integrated into the financial activities of the United States. As a result, all financial services have adopted and use FinTech in the form of, for example, loans, savings, personal finance and insurance. The United States is recognized as an attractive hub for FinTech financing and investment.
Benefits come from Fintech to the Global Economy
Financial Technology brings numerous benefits such as:
#Increasing Financial Inclusion
FinTech indirectly becomes a financial accelerator in the country and improves the course of financial transactions. With the increase in financial inclusion, the economy will also automatically increase.
#Offering Simple Financial Services
The existence of FinTech will make a variety of financial services quicker and simpler. The advantage for customers is the possibility to speed financial transactions, including payments.
FinTech also makes investment management advice more accessible for individuals as well as for businesses.
The ability to facilitate flexibility in financial activities is the next benefit of fintech for contemporary society. All financial transactions were formerly conducted offline, but they are now fully possible online. This entails that people can conduct financial transactions without limitations from any location at any time, giving every community the freedom it needs to conduct specific financial transactions.
#Better Quality of Life
FinTech contributes to raising the community's standard of living. The economy will grow more quickly the more financial activity there is. It aids in the improvement of the community's welfare and economic standing.
Technological innovation supports the growth of the digital economy by fostering digital industrialization. As a result, FinTech will encourage technological innovation, which will aid in the growth of the digital economy.
Explore FinTech apps developed by Railwaymen
If you are eager to learn about FinTech solutions in practice, then take a look at the Case Studies section of Railwaymen's website.
There, you can read about numerous projects, how they were developed and how each app progressed following the initial customer meeting. It's a substantial amount of knowledge that will encourage you to learn more about the financial world and its relationships.