, , ,

The world is changing quickly. Technology disruption affects almost every aspect of our daily activity due to technology, including the way in which we interact with other people, the way we do shopping or even the way we do financial duties such as payments, investing, or regular banking.

In fact, in the financial industry, this technological disruption receives the name of Fintech. According to Schueffel (2016), Fintech can be defined as “a new financial industry that applies technology to improve financial activities”. That is, a new way of offering financial services by using technological processes and applications. This new financial industry is associated with innovative companies that deliver either new services (for example, crowdfunding) or old services in a new manner (for example, robo-advisory). So that, it has become the main challenge for tradition financial companies such as banks.

Relative “fintech” searches at Google

Fintech searches at Google - Schueffel 2016

Source: Schueffel (2016)

There are three areas where the Fintech disruption is influencing extensively. The first one is customer experience. In a digitalized world, physical client-firm relationship is redundant and fintechs know it so are creating new means of delivering services. As an example, online and mobile banking is causing important changes in the traditional banking system, like a reduction in banking offices and job destruction. The second reason why fintechs are considered a disruption is because this kind of companies are reducing widely operating costs, so they can offer cheaper services. Lastly, the application of technology to finance is changing the competitive structure and the traditional environment of competency among companies.

Most important reasons to consider an online or a mobile non-bank provider (%)

Reasons to use mobile banking - EY 2017

Source: Customer experience: innovate like a Fintech, EY

According to Spanish Fintech, the industry can be split in different categories depending on the service the companies provide. They distinguish the following in the Spanish fintech landscape, although these categories do not include insurance companies or the so-called Proptech and Regtech, which are not exactly financial companies:

  • Investment, which include social investment networks, trading platforms and robo-advisors, among other.
  • Equity Finance
  • Administrator
  • Payments, which include direct debit and other payment platforms and means.
  • Foreign Exchange, some of them based on blockchain technology.
  • Lending, which include a wide range of subgroups such as P2P, crowdlending, microcredits, factoring and some other services.
  • Finance Infrastructure
  • Personal Finance
  • Financial Products Distribution, among which stand out comparing platforms.
  • New Banks
  • Other

In conclusion, the Fintech industry covers a lot of different companies with one common characteristic: the use of technology to provide financial services at lower costs than traditional finance and providing better services.