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What are fintech companies and why is so important to know about them

Companies are called fintechs when they offer digital financial services and technology. The term fintech is derived from Financial Technology. Fintechs claim to develop the status of existing financial services businesses. This development is mainly digital. The services are related to both the private and the business customer sector, here is an example from the business sector.

The goals of fintech companies

Many fintech companies and start-ups want to change the already existing, classic financial services sector. This should be improved by the influence of modern information and communication technology or even completely renewed.

New financial services are being created. Fintechs customers should benefit from a user-friendly and intuitive operation through digitization. Above all, the focus is on increasing profitability.

Fintechs try to tailor their financial products to the individual customer. These are offered digitally in the form of computer software, online platforms or apps. The digitization of the various financial services creates a high degree of transparency. Experience shows that customers attach great importance to this. Therefore, the digital development of financial services has the potential to prevail over the classic banking system.

The digital processing of financial services can also enormously increase the profitability of the bank. Above all, personnel costs can be significantly reduced. In addition, both the customer and the bank saves a lot of time. The customer also benefits from cost savings by the banks, since services can generally be offered with lower fees.

ETFs are financial products that are not marketed by traditional commercial banks. These offer only fintechs. ETFs are passively managed funds. That is, they only reflect the performance of a particular index and are not actively managed by a fund manager. The cost of resources is very low for offering ETFs. As a result, the fees for an ETF are usually less than one percent. By contrast, actively managed funds cost between five and seven per cent fees.

Practical application areas

Fintechs already exist as payment services for online shops and as payment services for mobile devices. Smartphones or tablets should be able to process payments automatically via the current account and thus replace their own wallet in the long term.

Also so-called P2P loans are offered by Fintechs. Private individuals lend other individuals money at a fixed rate without the intervention of a bank. The fintech does not act as a bank, but merely provides the platform for lending. Crowd-Investing is also offered by Fintechs. Investment properties (mostly real estate) are financed by many different individuals. These individuals lend money to the builder at a fixed interest rate.

Potential of Fintechs

Numerous fintechs have already established themselves successfully in the market and provide competition for the classic banking system. Especially online platforms that compare different financial products and innovative investment opportunities are the focus. Customer and revenue growth is unbroken.

Fintechs still have a huge potential, as the classic banking system is now rejected by many citizens. In addition, Fintechs are specifically looking for innovations in the financial services sector. These innovations hold enormous growth potential. Above all, the progressive digitization plays the fintechs in the cards.

In the long term, fintechs could be a real competition and threat to the classic banking system.

Trustly is a Swedish fintech company founded in Stockholm in 2008. The company’s vision is to make online payments safer, easier and faster. In addition, the company is working to reduce the fees for a transaction. These fees still charge most modern payment systems.

The company has been profitable since its founding in 2008. In 2010, offices will be opened in Malta and the number of transactions will hit the million mark. In 2011, Dellyit granted Trustly the Rising Star status. The company is the second fastest growing technology company in Sweden. Offices will be opened in Barcelona in 2012 and 4 million transactions will be recorded. In 2014, Trustly and PayPal agree to cooperate. In 2015, 2 million transactions will be processed each month. In 2017, the company has already processed a total volume of more than 10 billion euros.

Published inFintech

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