Financial technology (fintech) start-ups are companies that simplify customers experience of new and existing financial products.
These financial technology (FinTech) start-ups started to gain footing in the market and attract investors after the 2009 financial crisis.
The term “Fintech” is an umbrella term for the emerging global fintech market. These are various start-up businesses that combine finance and technology to offer products and services in the finance and banking sector.
This article presents nine categories of fintech start-ups and what they do to simplify customers experience of new and existing financial products.
Although some of their services are not necessarily new. However, they make use of existing systems and data to transform financial services in a more efficient manner.
Overall, fintech start-ups help to simplify customers experience when using financial products. They achieve this by using evolving innovations such as mobile technologies, blockchain, artificial intelligence etc.
Fintech start-ups are highly customer focused and are very responsive to customers’ needs, raising large sums of money.
The user-friendly digital payment solutions of fintech start-ups have a huge influence on entrepreneurial finance.
Nine examples of financial technology start-ups and what they do are:
1. Asset management financial technology (fintech) start-ups
The asset management fintech start-ups are companies that offer services such as robo-advice, social trading and wealth management.
Robo-advisor services are low-cost algorithm based investment platforms designed to provide innovative asset management.
The most common of this algorithm system takes a customer through a number of steps to the most appropriate service.
They are online based platforms that provide personal advice on financial instruments with limited human involvement.
Social trading services helps financial investors observe what other traders are doing.
They can copy and integrate techniques used by others, social indicators from user generated financial content and technical analysis into investment decisions.
In terms of wealth management, the tradition wealth management services which involve a customer calling, booking an appointment and submitting questionnaires are now replicated digitally.
In addition, Asset management fintechs also personal financial management apps, or software.
2. Exchange services
These start-ups provide financial or stock exchange services, such as securities, derivatives, and other financial instrument trading.
Exchange services fintech start-ups provide on-demand currency exchange services which are straightforward and user friendly for individuals and businesses.
In addition, some fintech start-ups also provide technology for financial services companies by developing currency exchange software and tools for currency exchange comparison.
These fintech entrepreneurs provide alternative sources of financing. They are vital to achieving financial inclusion especially in developing economies.
These start-ups provide financing services such as, provision of crowdfunding, crowdlending, microcredit, and factoring solutions.
Crowdfunding provides capital benefits to entrepreneurs who otherwise do not have access to traditional sources of financing.
Crowdlending is loan-based crowdfunding. These platforms are alternatives to traditional banking and they provide credit to entrepreneurs by direct connection with investors.
Loans are brokered over the internet between the borrower and the lender.
Through the use of technology-based loan application systems developed by fintech start-ups, microfinance institutions loan officers are able to work more efficiently and effectively in approving loans.
Fintech start-ups also leverage technology to improve cashflow.
They provide digital and transparent factoring services that help to provide liquidity solutions to suppliers, helping to prevent delayed payments.
Some are capable of providing solutions that improve liquidity within 24 hours.
InsurTech are start-ups that focus on providing services around brokerage and insurance.
These start-ups use technology to make insurance services more efficient.
Examples are start-ups that broker peer-to-peer insurance, spot insurance, usage-driven insurance, insurance contract management, blockchain-based insurance and crowdfunding services.
In addition, they offer brokerage services as well as claims and risk management services. These start-ups disrupt existing insurance companies that rely less on technology.
5. Loyalty program
These are start-ups that provide loyalty program services to customers.
They act as loyalty program managers for companies often using big data analytics and are closely linked to payment transactions.
The loyalty program involves, for example, start-ups providing customer service for their client customers; by providing fraud mitigating technology.
Their services also ensure that rewards and loyalty cards are outstanding for brand loyalty and give customers advanced access to new products, special sales coupons, or free merchandise.
The services also make a more efficient system by integrating loyalty into payment such that it simply adds a purchase to loyalty card without customers needing to carry endless numbers of loyalty cards.
Fintech start-ups that provide payment and transfer services focus on areas such as the interaction between business and customers, domestic transfers as well as international transfers.
These start-ups involve business models that provide new and innovative payment solutions, such as mobile payment systems, e-wallets, or cryptocurrencies.
Some provide online payment services across diverse countries around the world such as digital payment systems, money transfers and remittances.
Some fintech start-ups integrate their payment platforms with existing social media platforms while some social media platforms have also entered the fintech payment market with their own peer-to-peer payment features.
7. Regulatory Technology
Regulatory technology (RegTech) start-ups are fintech start-ups that offer services based on innovative technology.
The technology is often cloud-based and robust to cater for complex and changing regulatory environment.
They capable of managing and backing up data remotely and removing the challenges of regulatory compliance from their clients.
These start-ups help their clients to find solutions to regulatory compliance challenges.
RegTech start-ups offer services that help financial service companies monitor financial transactions in real-time, they also provide software solutions that help in monitoring regulations.
For example, some RegTech start-ups provide services that help to authenticate or limit fraud.
Their services are carried out in the context of regulatory monitoring, reporting, and compliance benefiting the finance industry.
The services are costs effective for both the RegTech start-ups and their clients because they are cloud-based.
8. Risk management financial technology (fintech) start-ups
This category of fintech start-ups provide services that help companies to identify, manage and control threats to their earnings.
The services provided by fintech start-ups also help companies to better manage the financial reliability of their competitors and better manage their own risks.
For example, the financial technology companies make use of data from social media platforms to analyse consumer behaviour and preferences in assessing lending risks.
9. Financial technology (fintech) start-ups for investor education and training
Many fintech start-ups also offer investor education and training, innovative background services (e.g., near-field communication systems, authorization services).
In addition, they offer white-label solutions for various business models, or other technical advancements.
All these are classified under other business activities of fintech start-ups.
Through community-level and individual-level investor education, fintech start-ups are able to build trust and ensure that may people are reached.
Investor education helps to prevent problems down the line because consumers are able to make informed decisions.