Financial technology or fintech, for short, refers to new tech that improves and automates the delivery and use of financial services. Fintech helps business owners and consumers better manage their financial operations, processes, and lives aided by specialized tools.
Fintech companies thus refer to organizations that help financial institutions modernize their systems, processes, and operations.
- What Fintech Company Categories Are There?
- Top Fintech Companies You Should Know About
What Fintech Company Categories Are There?
Various types of fintech companies exist today, which are mostly categorized based on the industry their clients belong to, which include:
Fintech companies in the lending industry simplified the way by which people borrow money. In the past, people turned to banks or credit unions to obtain loans. Today, many fintech companies offer consumer loans by merely going online to apply. And because these organizations’ processes and systems are automated, approval happens quickly.
Fintech companies under lending use advanced software to assess borrowers’ creditworthiness. They have also automated the underwriting process, allowing them to serve more borrowers than traditional banks and lending institutions. Examples of fintech companies in this category include Kabbage and Borrowell.
Fintech companies specializing in payments let people send money to others without passing through banks. As such, they no longer need to pay exorbitant bank fees for simple peer-to-peer transfers. They typically use technologies like blockchain. Examples of organizations in this category include Circle and Venmo.
International Money Transfers
People used to pay a lot (as much as 8%) for internal money transfers. Worse, traditional transfers are slow.
Fintech companies today, however, offer faster and less expensive international money transfers. An example is Ripple, which can send international money transfers in seconds.
Traditionally, people need to talk to financial advisors in banks to get personal finance advice. To craft their budgets, they need to use spreadsheets or an envelope system.
Today, many commercially available apps can offer advice and help with budgeting. Fintech company Mint, for instance, allows consumers with their budgets. Level Money, meanwhile, helps people save. Some organizations even provide retirement or investment advice.
Fintech companies in this sector make it easy for business owners to raise money. Some of them connect accredited investors with vetted startups. Others use crowdfunding models and allow anyone to invest in new businesses. In sum, they simplify the business fundraising process.
In the consumer banking space, fintech companies provide consumers better options to banks, which usually charge high fees. People who can’t get approved for credit cards or don’t want one can get debit cards instead. Companies like Green Dot and Netspend are examples of fintech consumer banking companies.
Fintech companies also ventured into the insurance market, but they mostly focus on distribution. They use apps to reach customers that don’t have insurance coverage. As such, they let people who want to borrow a friend’s car to buy insurance for just a few hours. But since insurance is a highly regulated sector, organizations in this category typically partner with traditional insurance companies.
Top Fintech Companies You Should Know About
Many fintech companies have sprouted worldwide, but some are more recognized and stable than others. Here are two of them, according to Investopedia:
This China-based fintech company is part of the Alibaba Group (BABA). It was founded in 2014 and started offering Alipay, the world’s leading third-party payment platform introduced in 2004. Today, Ant Financial runs Alipay, Ant Fortune, Ant Financial Cloud, and other financial services and has an estimated business value of US$150 billion in 2018.
Founded in 2006, this Netherlands-based fintech company gives businesses a single platform to accept payments through any sales channel anywhere in the world. It serves more than 4,500 firms, processing mobile, online, and in-store payments. Its customer roster includes Facebook, Uber, Netflix, Spotify, L’Oréal, Burberry, Symantec, and Microsoft. From 2015 to 2019, its revenue rose from US$98.5 million to US$496.9 million.
A New York-based multinational corporation founded in 1850, American Express specializes in credit card service provision. It has become a globally integrated payments company that provides customers access to products, insights, and world-class experiences that enrich their lives and build their business success.
Based in San Jose, California, the online payment solution provider continues to break down financial barriers for its users. It launched a new small business grant program through its subsidiary Venmo. It supports more than 325 million personal and business accounts in 202 countries and has been honored by industry organizations for bringing safe, professional financial services to millions of users worldwide.
Founded in 1966 and headquartered in Purchase, New York, Mastercard is a global payments tech company. It aims to connect and power an inclusive, digital economy that benefits everyone, everywhere by making transactions safe, simple, smart, and accessible.
Wisconsin-based fintech service provider Fiserv stands out for constantly improving its Clover business management platform. Its success can be attributed to acquiring rival fintechs and launching new digital-first banking and payment products.
Over the years, fintech companies have eased the way people pay friends or merchants with just a few taps on their mobile phones or keystrokes on their computers. Consumers and businesses alike benefit from the many fintech innovations we have seen.
- Fintech refers to new tech that improves and automates the delivery and use of financial services. It helps business owners and consumers better manage their financial operations, processes, and lives aided by specialized tools.
- Fintech companies can focus on lending, payments, international money transfers, personal finance, equity financing, consumer banking, and insurance.
- Some of the top fintech companies are Ant Financial, Adyen, American Express, PayPal, Mastercarc, and Fiserv.