FinTech, the concept emerging from the union of finance and technology, is still a relatively recent phenomenon of startups trying to transform the financial industry. It includes, according to the World Economic Forum, all online or mobile solutions for payments, insurance, transfers, investments, accounting instruments and credits, among other services. Randall Castillo Ortega, founder of SME funder RACO Investment, explains why FinTechs are now more successful than ever.
Accenture reported that FinTech investments increased by 201% between 2008 and 2013. Together with the Partnership Fund for New York City, it released another report which shows that global private investment in this sector tripled between 2008 and 2013 It rose from $928 million at the close. at $3 billion. It is now estimated to be $16 billion by 2023.
These companies have experienced explosive growth in part because of their relative advantages over the traditional financial system. These include lower costs, lower commission rates and access from any part of the world. All that is required is an internet connection.
As Castillo explains, Millennials are the biggest users of mobile technology, and according to Accenture, young people are almost twice as likely as older people to switch to a bank without physical branches or to tech companies that provide banking services.
However, the financial industry has recognized the need to include innovation in its business processes, products, customer acquisition, retention and product development strategies. Many investors are interested in Fintech. Many small businesses are using technology in new ways because of the creativity and drive of idea accelerators.
This phenomenon is not limited to Asia, Europe or the United States. These investments are growing fastest in Europe, where countries like the UK and the US are leading the way. This type of startup can also thrive in Latin America and the Caribbean.
On some occasions, FinTech companies find in markets that are not attractive to banks the perfect space to innovate. For example, the difficult access of the self-employed and SMEs to certain financial products has led to the appearance of companies such as Finanzarel, oriented towards invoice advances and promissory note discounting, Arboribus or Loanbook, dedicated to crowdlending, or Deudae, debt compensation.
Other times, FinTechs are able to improve basic services, offering a more comprehensive and affordable service from a user perspective. International transfers with currency exchange, for example, need at least five days to be effective. They also have significant costs for the customer. This has been taken advantage of by companies such as TransferWise, which allows its customers to make bank transfers in another currency with a lower cost than that charged by banks and in a shorter time than banks.
A FinTech, through the use it makes of technology, is a type of company that does a good job of analyzing the data it obtains from the different media in which it works. In addition to having a great capacity for interaction and, in many cases, adaptation. Being one of its objectives, the simplification of banking services, they achieve, in successful cases, that the consumer experience is agile and simple.
Although they are partly competitors of banks, some of the solutions developed by FinTech companies are taken up by banks to offer value-added services. Examples can be found in Apple Pay, Google Pay and others, which are now working with credit cards and banks to deliver new solutions.
About RACO Investment
RACO Investment is a financial investment company serving small and medium enterprises in Panama and Costa Rica. It was founded by Randall Castillo Ortega, an expert financial advisor who has his roots in the import and export industry in Latin America. The company has helped many startups find the financial backing they needed to get started. It has also provided bridging loans to help those looking to restructure or improve their operations.
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