The specific term fintech gets from the pairing of two corresponding areas: financial services and solutions based on innovative technology. The economic literature does not agree on a single definition of fintech due to the complete diversification of the business. The term “fintech” has developed its way into the Oxford Dictionary as “Computer programs and other technology used to support or enable banking and financial services.” Wikipedia defines “FinTech” as: “Financial technology, also known as Fintech, is a line of business based on using software to provide financial services. fintech firms are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software.”
It is possible to set out a broad working definition of the word that perfectly fits, To be specific, it is possible to define fintech as initiatives, with an innovative and disruptive business model, which leverage in the area of financial services. A more understandable definition of fintech is an industry made up of organizations using novel financial technology to support or enable financial services.
There are two primary aspects to consider—the topic and the scope of the definition:
• It is important not to consider fintech initiatives as an ecosystem populated only by startups. The term is frequently related to startups, mostly because the use of advanced digital solutions in financial services is a relatively modern trend. Even mature and maturing companies have started to revolutionize their businesses with advanced financial technology solutions, for instance, by making use of online or mobile services.
• The scope of the fintech definition requires more details. This Site presents a typical fintech business model. The model helps to acknowledge the reasons why some initiatives are more successful than others. It is important to understand that financial technology solutions are a highly complex and regulated topic, where several and different stakeholders place their interests.
Fintech initiatives cover a broad range of financial areas. Lending Club, one of the world’s largest peer-to-peer lending platform, directly connects borrowers and investors by making credit more affordable and investing more rewarding and promoting a completely new loan program.
Kickstarter, a very big funding platform for innovative projects, has strongly lowered the level of accessibility of funds for startups or simple projects. Wealthfront represents a fusion between finance and automation, providing the control of assets through complex algorithms. CommonBond is a marketplace lender that refinances graduate and undergraduate student loans. It has brought down the cost of student loans and allowed saving an average of 14,000 dollars over the lifetime of the loan. These examples describe a clear situation. Fintech companies are threatening traditional financial services. The former can provide more innovative and customer-centric business models. These disruptive organizations are gradually gaining market share and profits against traditional financial services, which are in serious need of reviewing their business models and changing strategy in order to be more competitive in the market.
Things have never been easy for fintech startups. Houman Shadab, a law professor at New York Law School, states: “Fintech is different from many other startup sectors because the financial world is heavily regulated and mostly consists of a relatively few numbers of large, well-established companies”. He points out the difficulties that the modern economic scenario is putting in place to threaten fintech initiatives.