Fintech companies are on an upward spiral. The word FinTech is a composite of the words financial and technology. However, what exactly do Fintech companies do? This blog will discuss what Fintech companies are and what they do.
What is FinTech and How it works?
Fintech companies combine financial data and products with innovative technology. By combining these two factors, fintech companies have created an opportunity where it is easy to provide quick online credit to different types of entrepreneurs. Fintech companies ensure that a credit check becomes easy and reliable. Through a PSD2 license, certain companies can retrieve and enrich raw banking transactions.
Financial technology is a type of technology built to provide better financial services. It can encompass anything from payment processing software to trading algorithms.
Fintech can be divided into two separate categories: Fin-tech companies and Financial Services organizations. Fintech companies are the ones that build the technologies, while Financial Services organizations are the ones that use them for their business.
How Fintech is Changing the Way We Bank
Fintech is changing the way we bank. They are redefining the industry with new technologies, innovative ideas and new ways of doing things. AI is transforming the banking sector in a number of ways. Some banks are using AI to automate customer service, while others have started using it to create personalized financial plans for customers. .The most common use of artificial intelligence in banking is customer service.
AI enables the bank to have highly personalized interactions with customers, automatically sorting through incoming requests and providing only the ones a human agent cannot handle. This means more satisfied customers who request less help from the customer service representative and banks that can be more profitable because of improved efficiency.AI is also used to detect fraud, which can cost a bank in the form of penalties and lost revenue.
AI helps by monitoring transactions, detecting anomalies that may indicate fraud and alerting human agents.Other uses for artificial intelligence in banking include:
- Financial forecasting and other predictive analytics
- Automated risk management and compliance monitoring
Artificial intelligence is being used to improve lending decisions by machine learning, to automate loan applications and for risk assessment. For example, using AI algorithms could help determine a borrower’s creditworthiness based on their social media posts. This would drastically reduce the time it takes for a loan application to be approved or denied.
How Fintech is Changing the Way We Pay for Things
The Fintach platform is the first of its kind in the world. It was created to provide a seamless, secure, and efficient way for people to make payments. The platform is powered by AI and machine learning.
It has been designed to provide a frictionless experience for both consumers and businesses alike. The company says that it wants to change the way we pay for things with their innovative approach.
FinTech in the Netherlands
Fintech companies are steadily increasing each year in the Netherlands. For example, there were 420 FinTech companies in 2018, and in 2019 there were already around 635 FinTech companies. FinTech companies have emerged to take on traditional banks. This is because more and more new innovative ways work for insurance, pension funds, and payment options.
PSD2 is a European law for the payment system of consumers and businesses. In the Netherlands, this law was introduced in 2019. The PSD2 law requires banks to give third parties access to consumers’ bank accounts if they give permission. Before this, only banks and account holders had access to this. Thanks to a PSD2 license, many numerous innovations are possible. When all your payment accounts and payment transactions are collected in one overview, a clever household booklet is created that can make predictions using previous payment transactions. Nevertheless, think of devices that can access your payment account in the future. When the refrigerator keeps track of its stock and sees that the milk is almost gone, it can place an order and pay immediately.
It was common to deliver as many documents as possible when applying for a loan in the past. Based on all the documents, the creditworthiness was determined. With the advent of FinTech companies, specific algorithms determine people’s payment behavior. As a result, it is determined in a very accurate way whether someone is creditworthy or not. FinTech companies also look at a person’s online data to determine whether that person is creditworthy or not. One of the sources of information used is your status on Facebook. This involves your language and the times of updates. It also looks at who your friends are and what is known about them. If you are friends with people with low credit ratings or high debts, you automatically score lower. Furthermore, the pages you follow on LinkedIn are also decisive.