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Financial Technology

Overview

The financial technology industry, commonly referred to as "fintech," includes companies whose products and services use technology to automate, enhance, improve, and deliver a wide range of financial services. Because its offerings are constantly evolving and cross so many different categories and industries—including banking, insurance, retail, fundraising, education, and investing—an all-encompassing definition of financial technology is elusive. However, the industry's products allow both consumers and businesses to manage financial matters and conduct transactions more easily, often by disrupting the status quo.

Financial technology's earliest solutions were employed behind the scenes, supporting inter-bank fund transfers and the legacy computer systems and networks used by banks, insurance companies, and other industry players. Over time, related products and services became more visible to the average consumer. Examples include the introduction of automated teller machines (ATMs), which made it possible to deposit and withdraw funds at any time without human assistance, and online banking. The advent of the Internet, smartphones and mobile applications, and emerging technologies like artificial intelligence and blockchain, accelerated financial technology's evolution and changed the ways financial services traditionally have been provided.

Today, virtually everyone uses the financial technology industry's products and services, often without even realizing it. Common examples include making mobile deposits with a smartphone, applying for credit online, using an online budgeting app, making mobile payments, digitally applying for a new mortgage, and using a robo-advisor to manage investments. Other examples include cryptocurrency exchanges and trading platforms that use virtual reality.

To support the financial technology industry's ever-growing array of products and services, workers with a variety of skill sets and backgrounds are needed. Opportunities exist in many areas, including finance, software engineering, cybersecurity, design, marketing, business management, data science, and compliance. On the technology side, important professions include artificial intelligence specialists, blockchain developers, Internet security specialists, data scientists, and mobile software developers. On the business and financial end, key roles include business development managers, compliance managers, and financial analysts.

The exchange of funds and the disclosure of sensitive information, including account numbers and Social Security numbers, is at the heart of the financial technology industry. This makes security is a primary concern. Identity theft and financial loss are real risks that must be considered when using any financial product or service. Regulation is another pressing issue with financial technology. Many of the industry's products and services are on the cutting edge and are meant to be disruptive. Some may even violate or fall outside the parameters of existing regulations.

There is no denying that the financial technology industry is firmly established, resilient, and poised for rapid growth in the coming years. A joint study conducted by the World Bank, the Cambridge Centre for Alternative Finance at the University of Cambridge’s Judge Business School, and World Economic Forum found that, overall, the financial technology market achieved strong growth in 2020, despite the challenges posed by the SARS-CoV-2 (COVID-19) pandemic. According to a December 2020 ResearchAndMarkets.com analysis, the global financial technology market was valued at $5.5 trillion in 2019. This figure is projected to grow at a compound annual rate of 23.58 percent through 2025.