New technologies that automate, improve or otherwise change financial services are appropriately named financial technology, or fintech. Fintech can be used by small businesses, corporations, entrepreneurs or consumers to manage financial operations using software. While fintech initially referred to back-end financial management programs used by financial institutions, in the 21st century, it has evolved into a consumer product.
Today, particularly with the evolution of smartphones, fintech is widely used in multiple industries and business sectors, including education, real estate, banking, investment and even nonprofit organizations. Cryptocurrencies like Bitcoin and Ethereum also exist under the umbrella of fintech. However, its focus remains the market capitalization on technologies in the banking industry.
Applications of Fintech
Financial technology is empowering by nature. It places investment, payment, collection, and other financial processes in the hands of individuals, where they used to be the domain of financial institutions. For example, when fintech allowed customers to take out short-term loans, that technology cut into the banks whose existence depends on consistent credit.
Fintech is not limited to one industry. Any business transaction can make use of fintech, particularly with the advent of digital currencies and the advancement of smartphone technology. Commercial and personal finance can use fintech to manage transfers with the market awareness that used to be available only to financial firms.
For example, individuals that want to open lines of credit without going through a bank, investors that want to assess new markets, and startup businesses that want to raise money can all use fintech. Even the simple act of depositing a check on a smartphone uses consumer financial technology.
Technology integration is the main theme of the fintech revolution. With such integration, businesses and consumers alike have discovered new financial markets to invest in and new ways to cut operational costs. However, integration has also made regulation necessary, as well as uncertain.
A primary reason that fintech has become so prevalent is that financial institutions used to integrate their services under one roof, from investment to trading to home mortgage services. Fintech has separated them into distinct entities, which allows each fintech company to specialize within the scope of their specific service. This allows companies to cut costs and increase efficiency, compared to the financial institutions that used to do everything.
Salespeople trained in financial products or trading services, for example, have been outmoded by software that does their service better than they do, directly from the consumer’s cellphone. Look no further than the cryptocurrency marketplace to observe investment and exchange on an unparalleled level, done with unparalleled ease, and from the comfort of the consumer’s home technology.
Fintech in Commercial Real Estate
The commercial real estate market is driven by the capital investments of industry leaders. However, the landscape of the consumer lending market has changed with the advent of fintech, which has created alternative ways to secure real estate capital like commercial bridge loans or construction takeout loans.
The existence of non-bank lenders has changed the way real estate loans operate, allowing many consumers to bypass traditional financial institutions in favor of peer-to-peer fintech trading services. Detractors of these services contend that no algorithm can secure a borrower, find the right commercial location, and cater to a property’s needs like a traditional financial institution. Fortunately, there are services that provide the best of both worlds.