How Currency Is Changing Form: The Fundamentals of FinTech

The Fundamentals of FinTech

From barter system to plastic money, we’ve come a long 8 millennia in the way we transact, in terms of both means and reach. And this decade we’re witnessing another revolution in currency: FinTech. FinTech is short for financial technology. It refers to the innovation in how people transact business, be it trading, banking, investment or money transfer. It involves the computer programs and other technology applied to support or enable banking and financial services.

FinTech is not entirely new though – it’s been around for as long as financial services have. However, after the 2008 global financial crisis, FinTech has evolved unprecedentedly, disrupting the way we look at investment, payments, insurance, asset management – in toto, money itself. As an example, if you use online wallets, payment gateways, or even your credit card to make a purchase, you are making use of FinTech.

How FinTech is Disrupting the Financial Industry

From financial institutions to service providers to customers, everyone is jumping on the FinTech bandwagon, precisely because there is no other way but this, given the technological surge. Certain ways FinTech has made its way into our lives are:

  • E-commerce has grown manifold, with consumers going for online, cashless transactions for payment
  • Trading platforms are getting more intelligent by the day, applying analytics to collect real time market data
  • Insurance products are becoming more customized and personal in terms of location and coverage, driving insurers and aggregators to gather more data about their customers
  • Digital currency is the new wave of transformation which has the potential to disrupt banking models as we know today
  • Financial regulation has caught speed with developments in FinTech, to regulate financial legislation and check any potential forms of embezzlement

New Entrants

Here are the new-fangled terms associated with FinTech that are doing the rounds these days.


Cryptocurrency is a decentralized digital currency that makes use of encryption – by converting data to code to produce units of currency and validate transactions independent of a regulatory body. In fact, for cryptocurrency, its users act as a collective regulator. The most popular digital currencies are Bitcoin and Ether.


Blockchain is nothing but a digital ledger in which transactions made via cryptocurrency are recorded publicly. Data is maintained in the ledger as ‘blocks’. Every time a block gets completed, it goes into the blockchain as a permanent database. As a matter of fact, blockchain technology was designed so that information pertaining to these transactions is immutable.


Bitcoin is the first and one of the most prominent cryptocurrencies in the world of FinTech. It was designed as a peer-to-peer (P2P) payment network independent of a regulatory authority. It allows money to be transferred end-to-end without passing through a financial institution.


Ethereum is a distributed application platform which employs ether as a currency for payment. Ethereum is a type of blockchain, but designed for people to build decentralized applications which allow end users to interact with each other directly.


RegTech stands for regulatory technology. It refers to technology that aids companies in the financial industry meet financial compliance norms. Developments like digital KYC (Know Your Customer) and AML (Anti-Money Laundering) are all products of RegTech.


Insurance technology has to do with the analytics and underwriting of insurance products. These days, thanks to the Internet of Things (IoT), it is possible to track data from vehicle global positioning systems (GPS) and fitness tracker wristbands, to evaluate risk associated with an insurance, and design more competitively priced products consequently.

What Does This Mean for Businesses?

With the advent of FinTech, we believe financial institutions would need to undergo a strategic overhaul, from reconsidering targeting to adapting to new technologies like blockchain. Existing companies should focus on:

  • Grasp the effect new financial technologies would have on their area of operation
  • Scan the business milieu for new threats and opportunities
  • Devise tactics to react to the wind of FinTech – from building new solutions to working with or acquiring FinTech start-ups

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