From the earliest era, education has been divided into three broad categories: humanities, commerce and science.
Commerce is that subject which deals with business related topics and is mostly practical based. Finance is one of the issues which fall under commerce.
According to Benjamin Franklin, you need to be aware of additional investments. These additional investments are like small holes, which if not filled, can sink a massive ship. In other words, unnecessary can casual investments can be the downfall of a whole business.
Henceforth, you should be aware of all expenses of a firm by keeping records and maintain a profit and loss sheet. This process of maintenance is known as finance.
However, finance is a vast subject, and in order to know more about it, continue reading.
What is finance?
Finance, as can be understood, is a study of management of money. It includes studies related to loaning, accounting, saving, and predicting.
However, finance can be broadly divided into three broad categories based on purposes it is used, and they are:
However, finance, in the present generation, is not only about keeping business and financial records manually. Due to the rise of this modern technology, manual recordings have been demolished from this world. According to EY FinTech Adoption Index, nearly 52% of India’s population and 69% of China’s population has adopted technology in finance’s development.
To understand it in detailed, please visit here.
How did financial technology come to the scenario?
You cannot possibly understand financial technology or FinTech without proper knowledge about how it developed and came to the scenario. Therefore, here is the whole history of how FinTech was developed to what its present status is.
When you hear FinTech, you probably imagine that it is all about a hassle-free payment system, which does not need any card or currency to make a transaction. However, financial technology was not so simple and modified when it was developed in the 1990s.
Internet was available to every citizen since 1990s, and it is then that this technology was born, but this idea was under construction since the 1800s. Financial institutes started using the internet to make their work a lot faster and simpler.
However, this technology took more than five decades to become stable. Companies took quite a risk in creating this technology. These risks were mainly for the management part, employment dispensation, capital supervision and data examination tools at the proper level for banks and financial service company.
The revolution began in 1860 when pan telegraph was invented. This device was mainly used to verify all kinds of signature in banking institutes by communicating.
This process used to take around 108 seconds in order to detect 25 handwritten words. This was followed by the invention of charge plates and coins for any loan or for exchanging goods and other services. These cards or coins used to bear the borrower’s personal information along with the credit details. However, this process was used until early 1980.
Fedwire was invented in 1918, which was used until 1970which transferred funds electronically. The imitation behind this invention was the United States Federal Reserve Banks, which was mainly to connect with all the reserve banks across this country, which were 12 in number.
In 1950 the Diner’s club introduced a concept of credit cards. Though credit cards were used earlier as well, this club provided cards which can be used universally. However, in 1958 it was American Express that expanded this form of credit cards.
The year between 1960 and 2018 showed a considerable development of this particular technology.
In 1960 Quotron started showing stock market rates on a computer screen. This helped brokers to get instant updates on the screen even last minute updates about rates. In 1966 the Telegraph networking was replaced by Telex networking websites. These websites are like today’s social media websites which allowed sharing any messages to distant corners of the world. In the following year, a concept of ATM machines came to light.
The evolution of online banking and e-trade started in 1982. However, from 2009 to 2017, the following features of FinTech were invented:
- Bitcoin (2009)
- Google Pay (2011)
- Alibaba introduced “Smile to Pay” service (2017)
What are the advantages of using financial technology?
Financial technology has not only helped to manage accounts more accessible, but it has also made the process, error-free. Apart from this, using financial technology has its advantage, and they are listed below:
- Improvement in the payment systems:
Payment systems are made much faster and convenient. Now, people do not have to spend hours in bank lines to make their payments and issue their respective invoices. Now with the help of financial technology, you can do the same from home.
- Data collection made easier:
Due to this modern technology, you can get all the information that you need right at your fingertips. With the help of financial technology, one can look into and evaluate all these data from anywhere and anytime.
- Rate of sanction:
Loaning system has become entirely with FinTech services. People are approaching lenders who have access to this technology because it has the capacity to increase the chances of getting a loan sanctioned. It is generally said that the credit or capital gets approved within 24 hours. This helps not only to make quick decisions but also helps to provide better customer service.
- Encourage healthy money management:
People often forget to make payments which are pending due to many issues. Healthy money management habits mean secure money payment without the headache of getting late fines. They also provide reminders of any due payment before attaching a new penalty to it. This also helps to enhance interaction between the service provider and the client.
- Encourages mobile connectivity:
FinTech services highly encouragethe usage of smartphones and gadgets to make better connections. This not only supports faster connectivity, but it also helps to connect a large number of people to a single firm. This also a method to improve transactions made by these people and the firm.
- High security:
To make sure that a large number of people are using this service for making payments and other transactions, it is necessary to build trust in the hearts of the people. FinTech services use high security such that there is no chance of cybercrime issues such as hacking and data theft.
What is the purpose of using these technologies?
Even though you have come to know about the advantages of using financial technologies, to identify a more about these technologies, you should also know what their purpose is:
In the present generation, people mostly trust robo-advisors for financial investment decisions. These robo-advisors are getting importance in the portfolio management section as well as stock markets. This has helped to make better decision making for investment-related issues.
- Advanced payment methods:
As said earlier, people are mainly using net banking, debit and credit cards and digital wallets to make more manageable payment. It is considered that by 2019, more than 5 billion people will use this technology to make hassle-free payments.
With the help of financial technologies, the process of crowdfunding has also become much more comfortable. Previously people had to move from door to door explaining people why are they collecting the money. It used to be both time consuming and tedious process.
However, with the help of these technologies, people put up their reasons online, and it is up to people how much they want to contribute to a cause. This process does not involve persuasion, so collectors have to put up a convincing message to collect the revenue. These collectors are also able to check the amount of money collected along with the names of those depositors.
- Internet and mobile banking methods:
This technology also provides more facilities to its users, and they are internet and mobile banking facilities. In can be said that in cases of mobile and internet banking, financial technology is used.Mobile banking is an advanced version of internet banking where individuals can make payments, check their account details and the history of their early payments with the help of an internet connection.
- A foretelling of future expanse:
One of the most advantageous parts where this technology is used is foretelling analytics. This technology scans the previous financial records of big industries and public sectors, and according to the list of these investments, they foresee the investments that a company can make in the new future.
This particular technology is a branch of FinTech and is used mostly in insurance companies. While applying for insurance or claiming the previous one, you do not have to present yourself physically at their office. This saves both time and energy of both the workers and the insurance holders.
What are the trends that have helped in developing the traditional financial system?
Venture in technology, especially the financial ones, continue to prosper. According to Accenture, there has been a rise by 18% scheme capital investment that too globally. However, it has only been possible due to the evolving trends that have been a significant help in the development of financial technology. Some of these trends are listed below:
- Investment on digitalization:
Since people are transforming their facilities rapidly with the help of this modern technology, financial institutions are also investing in FinTech to provide all the facilities that are available on the digital platform.
- Voice recognition:
The feature of voice recognition has collaborated with artificial intelligence; simply know as A.I., to expand the optimization of FinTech.
Banking institutions, along with other financial institutions, have been getting fruitful results due to the voice assistants incorporated by these institutions. This allows the customers to start a conversation through which they can discuss issues related to the services provided, calculations of mortgage loans, savings related planning, receiving current financial updates about the market and many more.
According to the Vice Chairman of MasterCard Ann Carins, voice recognition is that part of financial technology which has helped to provide a frictionless experience to the customers.
- Text related interfaces:
Even though so many facilities have come to the surface, yet texting has still managed to survive. That is, people still prefer to ask their queries through texts and emails rather than on voice optimized devices.
Hence with the help of financial technology, every financial institute has made its platforms where people can clear their queries, check their account details and make payments. This can be said as customer service that is simplified.
- The application of Blockchain:
The most renowned technology whose brainchildren are the bitcoin and other crypto-currencies is the Blockchain. This particular technology helps to record the transaction between two parties in a faster, confirmed and consistent way.
- Introduction of Cloud in financial departments:
The Cloud is a storage device where people can upload and download their financial and other documents with the help of an internet connection anytime and anywhere. It needs no hard disk which was primarily kept to store financial papers and records of a company. One also gets the facilities of accessing their files from anywhere if provided, and they have a stable internet connection.
Henceforth, the collaboration of finance and technology has made the world much faster and hassle-free. However, a human being cannot remain dependent upon technology for everything and has to do some of the work manually, but it can be said that financial technology has been a boon to lift some of the workloads from people’s shoulders. Hence, with the help of this modern technology, this world is evolving to a brand new level.
About the author:
Nancie L Beckett is well-reputed managers in one of well-known American accounting agency. She has completed her MBA from the Harvard Business School. She has been associated with many online teaching platforms and has been helping students on university homework help since 2013. She loves challenges and has crossed many such in her way.