Many people may not know it, but there are currently more than 15,000 FinTechs in the world. The US and the UK are the two countries that lead the world ranking with the most FinTechs on the planet. And FinTech apps are very diverse: mobile payments, budgeting, cryptocurrency management. The FinTech concept has been an important turning point in the renewal and innovation of the financial sector. Jason Simon, an expert on the subject of FinTechs, discusses more about the digital transformation of the world of finance today and how the banking paradigm is being changed with the implementation of FinTech apps.

FinTech apps are those that develop financial services intensively using new technologies, redefining a new way of understanding banking services. Currently, the FinTech applications industry can be divided into two general sectors. First is FinTechs not related to financial institutions. The first group of FinTech app includes original applications that were created by entrepreneurs not related to large financial institutions. The goal of these apps is to facilitate the process of money transfers or other banking services, bypassing the bureaucracy of banks. These services include crowdfunding, startup investment platforms, blockchain, currency exchange, and peer-to-peer lending.

Then there are FinTechs created by financial institutions. The second group of FinTech apps includes mobile banking applications that were created by large financial institutions in response to the challenge that advanced technology applications pose to them control of bank accounts, online financial management, and mobile payment.

“So far, the biggest contribution of innovation has come from the first group, through smaller, more agile organizations,” explains Simon. “The big financial companies and banks have now not only realized that mobile is the future (also) of finance and have copied some of the FinTech solutions, but they have also started to invest in some startups. They are interested in startups that create tools for other companies to use when creating financial products, but not the end product itself.”

FinTech companies could put 24% of the revenues of traditional financial institutions at risk. On the other hand, almost 50% of financial institutions already have agreements with FinTech companies.

“The main reasons for these partnerships are FinTech’s agility in adopting new technologies and testing new business models, their proximity to today’s and tomorrow’s customers, their flexibility and their efficiency,” Simon points out.

On the other hand, traditional companies offer trust, industry know-how, and a financial and customer muscle that small companies would take a long time to reach if they survive. A key point is the knowledge and experience of traditional banks in handling financial data.

This collaborative trend makes a lot of sense given the digitalization we are experiencing: customers are looking for a more digital, simple, and transparent way of contracting their financial products that is fresher, more agile, and closer. Thus, a new technology, the FinTech app, aims to compete with traditional financial methods in the provision of financial services.

According to several studies, 70% of FinTechs want to develop partnerships with banks to bring solutions to new consumers, help expand mobile payments, boost e-commerce acceptance, and solve problems for businesses. It is in the last case where there is more ground to cover.

The added value of bringing a new merchant online is greater than the value of bringing a new consumer from a more general economic perspective. Therefore, technologies that help small businesses participate in a digital economy have a multiplier effect for financial inclusion, for the economy of countries, but more importantly, for the future of millions of families operating small businesses.