Fintech, an abbreviation for finance and technology, has transformed the way our financial transactions are handled at this day and age. This blog aims to delve into the realm of financial technology, or should we say ‘fintech’, exploring its historical roots, latest trends, and the potential it has in changing the financial game.
A portmanteau of “financial technology”, fintech is a term that encompasses a wide range of tools developed to streamline and enhance conventional banking services and automate forms of finance for both individuals and businesses. From simple mobile applications to intricate blockchain networks housing encrypted transactions, fintech encompasses it all.
In an era where digital innovation has, and continues to revolutionize industries, the financial industry is poised to ride the crest of the ‘digital wave’. In this piece, we will take a look at how fintech has changed the face of modern finance. This blog, and its two subsequent blogs, will serve as a comprehensive guide, in which we’ll discuss the various types of fintech, the skills you required to work in the field, the complexities the industry faces (particularly in Iraq), and the employment prospects for a number of fintech careers. We will also examine several effective ways to learn key industry skills, such as joining specific communities, custom workshops, or online fintech bootcamps – a great way for ambitious fintech professionals to get hands-on experience.
What exactly is fintech?
A fintech company is the definition of any organization that automates, enhances, or modifies financial services for consumers or other businesses through the use of technology. Trading platforms such as Robinhood that facilitate automated portfolio management, while mobile banking, peer-to-peer payment services like CashApp, or our very own FIB (First Iraqi Bank) that facilitate peer-to-peer transactions, are all examples of fintech companies. Institutions that cover the development and trading of cryptocurrencies are also other examples.
To contrast, fintech-integrated businesses enhance their offerings by incorporating fintech, which is developed by fintech businesses, into their operations. So, this service would have integrated a fintech platform to make it easy for you to pay for your online purchases on e-commerce websites or ride-hailing apps.
The history of fintech
Although the term fintech’ seems to be associated with a surge of new innovation, the concept has existed for quite some time, and is definitely not new. Its rudiments can be traced back to the 1950’s, when credit cards first appeared on store shelves in the 1950s, and were among the earliest consumer-facing financial technology products because they made paper money obsolete. Later on, online stock trading services and bank mainframes became part of fintech. The founding of PayPal in 1998 marked a watershed moment in the financial technology industry, as it was one of the first businesses to focus mainly on the internet. With the rise of mobile devices, social media, and data encryption, this turning point moment resulted in an era of internet-centric financial services that have since developed into the advanced financial tools we use today.
How does it work?
Despite its multifaceted nature, fintech is a realm that you can gain a strong understanding of, and even become a professional in. Consumers and businesses alike benefit from FinTech’s streamlined financial transactions, which are both easier and cheaper to use. Businesses and services that use encrypted blockchain technology, big data, and artificial intelligence to enable safe internal network transactions can also fall under this category. Broadly speaking, fintech strives to streamline the transaction process, eliminating potentially unnecessary steps for all involved parties For better understanding, and example of our own, First Iraqi Bank (FIB), a leading (and relatively new) financial institution, adopted fintech to remain at the forefront of the evolving financial industry. FIB employs various fintech solutions to optimize its banking services, including:
Mobile Banking – Customers are able to manage their accounts and make transactions using their smartphones.
Online Payment Solutions – Simplifying the process of bill payments and fund transfers.
Digital Wallets – Enabling secure and convenient digital payment, such as allowing customers to pay for what they want using QR code payments.
Efficient Money Management – Allows users to manage their finances effectively, and through its modern solution, notifies customers whenever they make a purchase, send money or receive money, instantly.
So how has fintech integration in banking improved customer experience? Well, customers are introduced to better services, providing less wait times, and 24/7 banking accessibility, while also minimizing frequent visits for pointless reasons to the bank. Not to mention the operational efficiencies for the institution itself, automating processes, reducing costs, and improving service delivery. Surely, to keep up its trend of fintech innovation, FIB will be required to integrate more cutting-edge technologies, such as blockchain and AI for more personalized customers services, and it indeed will.
During these times, financial technology is more than just a tool; it’s a quiet, empowering ally that simplifies and streamlines all financial decisions and transactions. However, we frequently take these conveniences for granted, failing to appreciate the complex interplay between money and technology that enables them. It’s like a subtle magic, an underappreciated melody that gets lost in the midst of all the hustle and bustle.
The latest trends in fintech that are reshaping finance
Think back for a moment and journey through your daily routine. In this quiet reflection, you might just uncover unseen treasure that seamlessly weaves through the tapestry of your daily life: fintech. It was as easy as taking a picture with your phone and uploading it to your bank account when you deposited your pay check. Recall that apps such as Rocket Money allowed you to view your budget? Remember the bill for the meal you and your friend shared? No uncomfortable fumbling with cash or cards was required because of Billr. And later, as you effortlessly touched in and out using your phone at the tube line, or settled your Careem ride, fintech was there, invisibly facilitating each transaction. Perhaps, even your bold step into the world of crypto payments was empowered by fintech.
The world of fintech is as varied as it is dynamic, with different trends taking precedence based on each region’s unique technological, banking, and financial landscape. This diversity signifies not just the adaptable nature of fintech but also the tailored approach each country or region adopts to integrate these technologies into their financial ecosystem. Take, for instance, the case of Iraq. fintech companies here are currently navigating the initial stages of digital banking adoption. This foundational step is crucial for establishing a robust digital financial infrastructure, setting the stage for more advanced technologies in the future.
Contrast this with other areas in the MENA region, where fintech companies are probably already delving into more complex technologies like AI, machine learning, or blockchain. These advanced technologies represent future milestones for Iraqi firms, achievable once a solid digital banking foundation is in place.
The fintech sector went through a dramatic transformation during the last couple of years, shaped and led by a series of prevailing, dominant trends that arose in response to broader advancements in technology:
Digital Banking – Now easier to access than ever before, many consumers already manage their finances, requesting and playing loans, paying instalments through digital banks.
Embedded Finance – Through the use of embedded finance, non-financial platforms can easily incorporate banking services. While the ease of access to financial services like insurance through e-commerce platforms or loans through ride-hailing apps is undeniable, the increased security and privacy of consumers’ personal information should not be overlooked.
Open Banking – Customers, businesses, and third-party providers can now share data in a whole new way as a result of open banking. Due to this trend, fintech companies can develop new products like robo-advisors, which provide investors with personalised advice. It requires a large investment in security and technology, but it gives consumers control over their data.
Blockchain – New financial products, such as cryptocurrencies and decentralised finance (DeFi), rely heavily on blockchain’s distributed ledger technology. More efficient, secure, and transparent international money transfers are driving banks to embrace blockchain technology. Its complexity and the difficulties posed by regulations, however, are not to be disregarded.
Artificial Intelligence and Machine Learning – Fintech firms use AI and ML to improve a range of financial services, such as detecting fraud, assessing risk, and providing individualised financial advice. Improved customer service interactions, aided by AI-powered chatbots, lead to cost savings and increased efficiency. However, data privacy and algorithmic fairness must be addressed by these advancements.
Cybersecurity – Fintech companies are increasingly becoming a target for cyberattacks, making cybersecurity a critical concern in the sector. Firms are heavily investing into cybersecurity since keeping ahead of cyber threats requires for such measures to be evolved constantly.
Buy Now, Pay Later (BNPL) – The BNPL service offers consumers the option to purchase now and pay in instalments. This trend has gained popularity, especially among younger consumers, offering affordability and credit-building opportunities. However, it also poses risks of overspending and negative impacts on credit scores if payments are missed.
Digital-Only Banking – Neobanks or digital-only banks provide various financial services entirely online. Their affordable prices, round-the-clock availability, and user-friendly interfaces entice clients. The extensive product offerings and brick-and-mortar locations of more conventional banks may be absent from these alternatives. This is in fact an initiative launched in Iraq by INC.
Looking ahead, such trends are likely to continue to have a big impact in the future and remain influential. Surely, emerging technologies have the potential to disrupt the current fintech industry, but as technology continues to advance, the complexities continue to grow, and existing frameworks require revision.
Summary
We delved into the transformative role of fintech in modern finance, identifying key trends such as digital banking, AI, cybersecurity, and more. This article highlights the role of fintech in simplifying everyday financial transactions and its potential future direction amidst new technologies and regulatory changes. In the upcoming weeks, together we will explore the complexities that fintech companies face, particularly in Iraq, and the work that still needs to be done in the fintech landscape. Another intriguing part, and from a team that is well versed in the field, we will cover the skills one must acquire to work in fintech and discuss the employment prospects for a number of fintech careers.
"Fintech is not just about digitizing money, it's about monetizing data. It's about how we can create and capture the value of data in new, innovative ways."
