The Top 3 Growing Fintech in the US–and their Importance to Businesses

Financial technology or Fintech is taking over the world as one of the fastest-growing sectors in business. As a side player in the company’s back offices in the early years, it is now gaining traction as a forerunner and major player. Banks are quickly adopting it to interface with their customers and to expand their reach.

Business leaders are realizing that the landscape and its industries are shifting. The introduction of blockchain technology, the rise of enabling technology, the expansion of machine learning, and huge investments in the Fintech industry all point to a huge change in the financial sector that businesses have to watch out for. For example, according to Ernst & Young, 60% of consumers prefer to do their business with financial institutions on a single platform. Even among SMEs, 25% have chosen to use the services of fintech, and the number is growing.

Innovators are trying to find more ways to outplay the financial behemoths as venture capitalist money flows into them.

Trending Fintech

Here are some disruptive technologies your company needs to watch out for:

1. Regtech solutions – Regulation is one of the biggest headaches of the financial industry sectors as governments all over the world strengthen security measures to help make the industry safer for the consumers and for economies. Banks that overlook a new restriction could face staggering penalties and problems that could hurt them in the long run.

Enter Regtech. Regulation technologies are able to compile, keep track, and update new laws and restrictions to help financial companies comply with legal requirements. They are able to control a large amount of data in their database, helping companies search for regulation, conduct pre- and post-transaction compliance, and protect the interests of financial institutions, regulators, and consumers. Information Age points out that there are 300 million pages of regulation that global industries have to deal with. As such, regtech is becoming more indispensable than ever, as banks don’t want to deal with the ever-increasing costs of maintaining such details themselves while conducting their core business.

Companies like Corlytics have been working with financial institutions and regulators all over the world providing analytics services for enforcement data and regulatory data. These data help stakeholders plan and execute strategies and procedures as intelligence is given to them almost in real-time.

2. Digital-only banking – The digital age has given one boon to banks that they never had in times past: the ability to expand without a physical presence. Not only is finding a location a challenge, but the costs incurred in building the space and maintaining staff is a drain on resources that digital banks barely feel. While the more established players are offering digital banking solutions, the other smaller ones are seeing a bigger opportunity in another more radical director: go completely mobile and ditch the physical presence altogether, giving customers a better deal on interest rates.

The success of these disruptors, like N26, are prompting even some major banks to consider joining in the fray. Netherlands-based ING has also been rolling out its digital-only banking with a mobile-first approach in countries like Poland and the Philippines, where they have no physical banking facilities and are gaining success and traction with it.

3. Small-ticket loans – Financial institutions do make a lot of profit from loans. However, many professionals and small businesses don’t have access to lines of credit, especially when they need more time to be able to pay. Banks are often unwilling to underwrite these small loans because of low margins and high recovery costs, Credit cards offer as much as a 30-day delay purchase payments, but when it comes time to pay, consumers can be hit very hard with late payment fees.

Fintech companies are stepping in to fill the gap. They are able to underwrite loans at 0% interest rates, with the option to pay in installments, without consumers having to go through the process of authentication or entering credit card details.

This is the space where companies like Affirm thrive in. As the consumer demand for goods grows, so does their need for financial support. With many millennials slowly crawling their way out of debt into financial freedom, small-ticket loans are exactly what they need to be able to purchase what they want online.

The growth in these technologies is a huge boon to the financial industry as it helps them cope with the shifting business environment. Regtech is able to help financial institutions navigate complex regulations that differ per region all over the world. Digital-only banking helps companies reach more customers faster and with better cost-efficiencies. Small ticket loans are able to reach markets that traditional institutions can’t.

But as with any new technology, these are still in their early stages and improvement can still be made. Regtech still has so much compliance to deal with. Digital-only banking is stripped down to its very basics, and the tech might still have to upgrade some of its features. Small- ticket loans may still face issues with security and personal data protection.

As more and more companies jump at the chance to invest and innovate in Fintech, technologies are set to improve and create major impacts in the business environment and the way business is done. Companies will do well to watch out for these changes and see where they can employ them to ride the wave and come out on top.