It’s hard to believe that only a short time ago, the idea of paying for goods and services with a tap of your phone seemed like something out of a science fiction movie. But today, thanks to advances in technology, this is now a reality for millions of people around the world.
According to Statista, in 2022, the total transaction value of digital payments is estimated to reach $1,765 billion. In alternative lending through financial technology firms, the transaction value for every user in 2022 is expected to average $69,930.
This is just one example of how technology is changing the way we do business. For anyone who is on a finance career path, fintech is an area that is definitely worth paying attention to.
What is Fintech?
In a nutshell, fintech refers to the use of technology in the delivery of financial services. This can cover a wide range of applications, from mobile payments and peer-to-peer lending to personal finance management tools and blockchain-based solutions.
One of the key benefits of fintech is that it makes financial services more accessible to a wider range of people. For example, thanks to mobile banking apps, people can now manage their finances on the go without having to visit a physical bank branch. This has been particularly helpful during the pandemic.
Another benefit of fintech is that it can help to create more efficient and cost-effective solutions. For example, by using blockchain technology, financial institutions can securely and quickly process transactions without the need for intermediaries.
Trends in Fintech
Some trends in fintech include the following.
This is one of the most popular applications of fintech. In digital banking, consumers can use a mobile app or website to access their bank accounts and carry out various transactions. This includes making payments, transferring money, and checking their balance.
This is another popular trend in fintech. In peer-to-peer lending, people can borrow and lend money without going through a traditional financial institution. This is often done through an online platform.
The key benefit of peer-to-peer lending is that it can offer more affordable rates for borrowers, as well as higher returns for lenders. This is because there is no need for the financial institution to be the middleman.
Several online platforms offer peer-to-peer lending services. Some of the most popular ones include Lending Club, Prosper, and Funding Circle.
This is a newer trend in fintech. Cryptocurrencies are digital or virtual tokens that can be used to purchase goods and services. Bitcoin is the best-known cryptocurrency.
Risks Associated with Fintech Products and Services
Of course, as with anything, there are also some risks associated with using fintech products and services. For example, because these solutions are often built on new and emerging technologies, they can be more vulnerable to cyberattacks.
There have been some concerns raised about the regulatory environment surrounding fintech. This is an area that is still being developed, and there is a risk that some companies may not be complying with the latest regulations.
There are also many varieties of fraud committed in the area of fintech. For instance, falsified loan applications are often submitted to banks and other financial institutions. These include the following.
- Use of a fake or hijacked identity made from credit and personal information that seems to be authentic
- A person with a spotty credit history persuading family members or close acquaintances to take loans in their stead
- The deliberate distortion of the amount or origin of income
- Unverifiable employment
- Failing to declare debts, either previous or present.
- Misstatement of assets
Fintech Fraud Detection Tools
Fortunately, fintech firms can use financial services fraud detection tools to filter these out. These types of detection software use alternative data from social media and telecommunication services in analytics. Some fraud detection tools use the following flags:
This tool compares a person’s stated residence address to the numerous geo-locations the telecom provider has identified. It is a very astute fraud detection tool that can assist you in determining a borrower’s honesty.
This tool checks whether the mobile number of the indicated contact person in the loan application is one of the most texted and called numbers of the applicant. That will help assess whether they have a real connection.
This tool uses a blacklist of previously identified frauds. It checks whether any of the names on the list are among the most-called or most-texted by the applicant, establishing a connection.
Social Media Lookup
This tool uses the applicant’s mobile number or e-mail address to check his or her presence on various social media platforms. It can be used to verify identity.
What the Future Holds for Fintech
Despite the risks, it’s clear that fintech is here to stay. And as more and more people become comfortable using these kinds of solutions, we can expect to see even more innovation in the financial services sector. We may even see traditional financial institutions start to adopt some of these new technologies to stay competitive. So, it will be interesting to see what the future holds for fintech.