Technology brought many changes in every sphere of our life and financial one is not an exception. Giant companies actively implement smart technology solutions to provide better customer service and simplify various currency operations.
Have you noticed how seamlessly we’ve transitioned from traditional banking to digital one? We tend to manage our finance using applications, even the currency became digital. You’ve probably heard about two concepts called Techfin and Fintech which keep influencing the banking system and the way people do business. As numbers speak louder than words, let’s take a look at the statistics that we’ve collected.
According to market forecast the compound annual growth rate of Fintech is going to reach up to 30% by 2025. This is a promising forecast that will probably lead to the outbreak of numerous startups. If we speak about new Fintech businesses, it is necessary to mention that at the moment the USA has a leading position. The Statista reported that last year the largest number of startups (which is 5779 projects in average) was launched in the USA and that is 35% of the world’s Fintech market share. When it comes to banks, 49% of them trust and value Fintech partnership.
As to the Techfin, it is well-know that nowadays many companies are focused on implementing mobile payment options. The latest report states that in countries of European Union payments via mobile devices will triple by 2021. If we speak about the money, it is prognosed that the sum will increase from $52 billion to $148 billions.
Taking into account all these figures we cannot help but ask ourselves the most important question: “Will Fintech or Techfin become the future of our banking? Is there going to be a tough competition?”
To find the right answers, let’s distinguish Fintech from Techfin and check out how and in what spheres they are applied and what their main functions are.
Key differences between Fintech and Techfin
Although these two words sound alike, they differ a lot. To put it simply, Fintech implies the concept when the finance industry resorts to technologies to provide high-quality service, increase financial profit and reduce costs. The most common example of Fintech is any online banking application provided by a physical bank. Such services are used by everyone and they simplify the process of managing our money. There are also some non-traditional services related to FinTech such as PayPal, Venmo, Zelle, Starling or Monzo. They all are digital payment services widely used in the USA and Great Britain.
As to the Techfin, it is applied by technology-based providers. They offer new financial services which influence users’ interaction and help to expand the range of services. You’ve definitely heard about such business giants as Google, Apple, Facebook, Uber, Vodafone, Samsung, Mocrosoft, Alibaba and Baidu. Although all these companies are located in different corners of the planet, what unites them is that they resorted to Techfin and implemented new services for money operations.
F.e. Apple introduced Apple Pay which popularity skyrocketed and now numerous websites and applications have this option. Every business starting with food delivery and ending with travelling implements Apple Pay. Ability to perform contactless payment is the biggest trend of the last decade.
One more good example is Facebook and its announced cryptocurrency. This year Libra and digital wallet called Calibra are going to be introduced. Libra will be of use to those who do not have access to any banking account. Travellers will appreciate its benefits as they will not have to exchange currency when being abroad. Libra can be used to pay for goods and services. However, this topic is a contradictory one and people state that they would not trust Facebook with their money. Well, let’s wait and see how it all turns out.
Amazon has its own payment method and also a digital wallet. It doesn’t matter whether you are a merchant or a buyer you can equally easily benefit from Amazon Pay. Customers can simply sign-up and buy any product and sellers can quickly get their credit card info. There is also an option allowing you to link-up with Amazon Pay to use it while buying goods from other stores. The customers will not need to create a new payment account to shop.
Sellers who use Amazon service should pay a fixed sum of money for authorization, and there is also a fee for transaction processing. The first one is $0.30 while the latter one requires almost 3% from transactions within the country and almost 4% for cross-border transactions. That is a great deal of income that Amazon shares with card issuing companies and payment networks.
New platform providing financial services was introduced by Uber last year and it is also worth mentioning. This service is called Uber Money and it allows both drivers and passengers to sign up for a debit or credit card. The latter ones will be able to track their expenses, while the drivers could benefit from cashback on gas if they choose debit card.
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How they change financial services
At first sight it may seem obvious that Fintech and Techfin would both benefit from mutual cooperation. Their mechanisms and range of services can complement each other and attract more business companies and users. Nevertheless, the current situation shows that Techfin and Fintech tend to compete and this struggle is rather tough. To illustrate it better, we will provide a couple of real examples.
Let’s speak about China. You may have heard about such application like WeChat. Chinese citizens use this giant messaging app for making video calls or texting each other. WeChat has an integration with other services (games, tickets booking, shopping, etc.) and what is more important it offers to sign up for wallet and perform financial operations within the app.
In China you will rarely see any cash, because all locals pay for goods, services and household using WeChat. People understand all key advantages of this convenient payment method and they rarely open a real bank account. This means that Techfin triumphed in Chinese financial system.
One more financial giant Google sees the future of banking in AI. Google launched its own paying service (Google Pay) in 2015 letting all users enjoy making purchases using tap-to-pay options. Since that time the company aimed to improve the services and worked upon developing voice assistant functionality and adding more integrations to the payment system. It also invested a lot into AI development to make buying goods, ordering food, paying for rent and many more qute predictive and fully automate.
If you use Facebook Messenger, then you are probably aware that it has a peer-to-peer payment option. Due to this service Facebook users can transfer money to their friends in a conversation box without any fuss. The debit card of a user is linked to Messenger so the user can easily perform a transaction at any moment. Facebook has 200+ million users in the USA, 6% of whom use peer-to-peer payments a couple of times on a daily basis and 3% perform money operations at least once a day. So basically a communication app became a powerful financial tool.
In one of our previous articles we have already covered the topic regarding reasons why every bank needs an application and what trends should be taken into account. As experts in software development we know how to build online banking applications or implement Apple Pay. But as you can see from our examples, not only banks require apps. If you are searching for a way to enter the digital market, then creating an application with a financial component can be the best choice. As you know, many financial giants strive to improve their business using the technology and this tendency will probably keep being popular.
Although banks’ tech only started its way towards massive changes, we will observe major progress in the near future. Applications with online payment options are already a part of our daily life and they will only keep improving and getting more advanced. The changes are inevitable, so whether Fintech or Techfin would win the market, the main winner will always be a customer. After all the main goal of technology implementation is to make clients’ lives easier.
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