Fintech Ecosystem: Industry Overview & Market Research

Fintech is firmly entangled in the fabric of our financial society, and it appears its influence will only grow in the future. As consumers increasingly turn to alternative, digital methods of managing their finances, tech-savvy startups and traditional financial institutions (FIs) alike are diving into the fintech industry. In recent years, the FinTech landscape has been defined by disruptive digital technology transforming banking and financial services. Since then, FinTech companies have successfully filled gaps left by existing financial institutions to serve customers’ evolving needs. The industry is now defined by innovation drivers, moving beyond disruption and towards widely adopted technology.


Core services include data storage, processing capacity, networking, and software applications. As a result, FinTech is transforming various broker-dealer business lines including investment banking, wealth management, trading, and research. All of these FinTech-related changes contribute to an evolving landscape for broker-dealers’ operations. FINRA’s Office of Financial Innovation (OFI) is the central point of coordination for issues related to significant financial innovations by FINRA member firms, particularly new uses of financial technology (FinTech).

Blockchain Technology in Finance

For starters, several crypto trading platforms have emerged in recent years that allow users to trade different kinds of cryptocurrencies and take advantage of decentralized exchanges. And to keep people’s digital currency safe, a number of crypto wallets have sprung up as well. In addition, several fintech companies use blockchain technology for payment processing, money transfer and secure digital identity management. Some examples of cryptocurrency fintech companies include Coinbase, Blockfi and SALT. Though the fintech industry conjures up images of emerging startups and disruptive technology, traditional banks and financial institutions are in the game now too, adopting fintech services for their own purposes. Here’s a quick look at some examples of how the industry is enhancing and evolving some areas of finance.

Is fintech good or bad?

The fintech industry is one of the fastest growing in the world. However, as with any emerging industry, there are risks and opportunities. The fintech industry is one of the fastest growing in the world. And with good reason.

From mobile car insurance to wearables for health insurance, the industry is staring down tons of innovation. Fintech, a combination of the terms “financial” and “technology,” is the application of new technological advancements to products and services in the financial industry. But today, adaptability and quick iteration (not to mention instant gratification) are precisely what consumers and business owners expect—and, increasingly, need. Banks use fintech for back-end processes—behind-the-scenes monitoring of account activity, for instance—and consumer-facing solutions, like the app you use to check your account balance.

Reimagining Money in a Digital World

These investment advice tools can be used by financial professionals or by clients, with many client-facing tools often referred to as “robo advisors” or “robos.” Initially launching in the Nordics, where four large banks control more than 80% of financial assets in their respective country and consumers lack individualistic loan pricing and robust financial management alternatives. Blockchain is a distributed technology, which can be used to design fully decentralized solutions. When blockchains are public and decentralized, and they’re used as ledgers – this is actually their primary function – people and businesses have full access to data recorded on top of them. The best part is that both the entities that produce that data and those who check it can simultaneously maintain pseudonymity – or even full anonymity. Nevertheless, financial technology constantly deals also with this aspect, especially when it comes to businesses – and we can observe this with the birth of another fintech sector, RegTech.

  • Regulators, academics and innovators came together to discuss how technology is creating a new landscape for compliance efforts in financial services.
  • Quickly introduce new services, find a sponsor bank and extend your reach with the vast network of financial institutions and merchants we serve.
  • Different business models have emerged in this space, including social media data analytics companies, social media sentiment-based product issuers, crowdsourced research networks, and social networking platforms.
  • That said, many tech-savvy industry watchers warn that keeping apace of fintech-inspired innovations requires more than just ramped-up tech spending.
  • In addition, FINRA has issued a Special Notice discussing its machine-readable rulebook initiative designed to enhance firms’ compliance efforts, reduce costs and aid in risk management.

Embedded finance refers to financial services offered seamlessly in consumers’ everyday experiences through non-financial products and services. For example, Shopify Balance provides business checking accounts for Shopify users that help them get paid faster and manage their business. Shopify isn’t a financial institution, making Shopify Balance a financial product ‘embedded’ in a non-financial product. Companies like Unit and are helping make this ubiquitous, through API integrations that embed financial services directly into the product or user experience of non-financial companies. One of the most central components of the financial system, banking services have been shaken up by the industry.

Top 10 Biggest US Banks by Assets in 2023

Fintech innovation driven by non-bank entities puts pressure on banks and other regulated financial institutions to embrace new technologies and develop similar capabilities. Hence, notwithstanding the opportunities discussed above, developments in fintech can also create and augment a number of risks and complexities in terms of privacy, personal information and data treatment, customer protection, transparency, and cyber-security. Financial regulators are now trying to encourage developments in fintech by providing an environment where innovation can thrive, while simultaneously protecting markets, consumers, and investors. From payments to wealth management, from marketplace lending to equity crowdfunding, a new generation of startups is emerging within the FinTech sector.

  • Though the fintech industry conjures up images of emerging startups and disruptive technology, traditional banks and financial institutions are in the game now too, adopting fintech services for their own purposes.
  • It has also impelled many financial institutions to begin using non-traditional data (such as income or rent payment history) to more accurately evaluate creditworthiness, which can help consumers without established credit qualify for loans.
  • To provide informed perspective about future directions for asset management, CFA Institute monitors trends affecting the investment industry and the outlook for professional investors, studying new data and gathering insights from industry leaders.
  • Robo-advisor adoption is set to grow in the future — presenting an opportunity for fintechs and incumbents alike.

Technology has, to some degree, always been part of the financial world — whether it’s the introduction of credit cards or ATMs, electronic trading floors, personal finance apps and high-frequency trading in the decades that followed. And if recent venture capital investments in fintech startups — which reached an all-time high in 2021 — can be considered a vote of confidence, the industry will continue to expand for years to come. Although Merriam-Webster just added the phrase to its dictionary in 2018, the concept dates back decades. ATMs, for example, were once on the cutting edge of fintech innovation, as were signature-verifying technologies first used by banks in the 1860s. As such, regulation has emerged as the number one concern among governments as fintech companies take off. Quickly introduce new services, find a sponsor bank and extend your reach with the vast network of financial institutions and merchants we serve.

Does fintech apply only to banking?

Fintech solutions help financial advisors and wealth management platforms aggregate held-away account information to better grow assets under management (AUM) while delivering more holistic financial advice. Atom Finance, for example, offers a suite of products and features to help users research and track all of their investments in one place. Stash is a subscription platform that gives customers easy and affordable access to investment, education, and financial advice products. Fintech covers a wide range of use cases across business-to-business (B2B), business-to-consumer (B2C), and peer-to-peer (P2P) markets.

How does fintech make money?

Third parties/referral fees

A common business model in the fintech world is to bring in customers with free value, then show financial product offers like personal loans and credit cards. If a customer of the free fintech product then signs up for the credit card offer, the fintech company gets paid a referral fee.

Initial coin offerings (ICOs) are a form of fundraising that allows startups to raise capital directly from lay investors. In most countries, they are unregulated and have become fertile ground for scams and frauds. Regulatory uncertainty for ICOs has also allowed entrepreneurs to slip security tokens disguised as utility tokens past the U.S.

According to the report, 3 out of 4 consumers had become users of money transfer and payment solutions. New technologies, such as machine learning/artificial intelligence (AI), predictive behavioral analytics, and data-driven marketing, will take the guesswork and habit out of financial decisions. “Learning” apps will not only learn the habits of users but also engage users in learning games to How Do I List Remote Work on my Resume? Remote Work Guide make their automatic, unconscious spending and saving decisions better. Cloud computing is transforming how broker-dealers operate by providing opportunities to enhance agility, efficiency, resiliency, and security within firms’ technology and business operations while potentially reducing costs. At the same time, firms are seeking to address certain key considerations in moving to the cloud.