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The fintech space and the players in it have been around for a while now, but "fintech" is becoming increasingly difficult to define. What once started as a term to define the tech startups coming to disrupt the big banks after the Global Financial Crisis (GFC) has now changed to include the banks it came to disrupt. So what is fintech, what are the benefits and risks, and what fintech products are there? This guide will take you through what you should know.
Fintech is any use of technology in financial services to develop or improve products and services. While this definition can be applied all the way back to the introduction of the first ATM in the late 1960s, fintech really became a term applied to the rapid redesign of financial services following the GFC in 2007/08. From this point, we have seen new technology being used to introduce a raft of new banking and lending products that are increasingly becoming faster, cheaper and more accessible.
There are a number of different types of "fintech" products, which include new products as well as improvements of existing products. Fintech products can include, but are not limited to, any of the following:
Fintech companies are usually thought of as being tech startups, but a fintech company is any organisation that is using technology to develop or improve financial products and services. This can include banks and startups.
In Australia, banks have experimented with new technologies, brought out innovative products and partnered with fintechs to progress fintech innovation. While not every bank is a fintech, banks have developed fintech products and adopted agile approaches used by tech organisations in order to keep up with the pace of change and bring out new products quickly.
It is also becoming increasingly common for banks, tech companies and fintech companies to work together to bring out fintech products and services. So, whereas in the early days of fintech, only disruptive players were considered fintechs, now startups as well as banks can be considered to be fintechs if they are changing financial services.
There are varying levels of regulation for fintech products and services. The Australian corporate regulator, the Australian Securities and Investments Commission (ASIC), has taken various actions with fintech products and services in order to encourage innovation and competition as well as protect consumers.
For example, to encourage innovation, ASIC established a regulatory sandbox to allow fintech companies to develop and test products and services in a limited environment before getting a licence. Also, in 2016, ASIC released guidelines for robo advisors to follow to ensure customers are protected when using their products and services. Australia's seven largest fintech business lenders also established their own code of conduct in order to self-regulate.
The following are a number of advantages to fintech:
What is an incumbent?
An incumbent is any large institution that is established in the financial market, usually a bank.
Can a bank be a fintech?
Yes. Banks offer many innovative fintech products and services as well as partner with fintech companies to help move innovation forward.
Are large tech companies such as Amazon and Google fintech companies?
While still referred to as tech companies, Amazon, Google and other large tech companies can and have offered financial products.
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