Venture capital firms are watching this fledgling technology closely.
The business world continues to evolve, thanks to modern technology. One of the most talked-about tech phenomena today is fintech, or financial technology. This is the use of modern technology, whether it's software or another form of tech, to design and deliver financial services. PayPal, for example, is arguably the most well-known fintech company and worth almost $50 billion, which is more than Netflix, Twitter and eBay.
In this article, we take a closer look at financial technology and why so many people think it's a smart investment opportunity.
Fintech is very much in its infancy
When you compare fintech to other forms of technology that have been created and gone on to become essential for the modern consumer, it's only just taking its baby steps. If financial technology achieves the type of success that it has the potential to, those who invest now, in its formative years, stand to make a massive profit.
There's always a sense of intrigue and excitement surrounding new types of technology, in particular for investors. For example, if you look back to how companies like Apple began and what they have become, there's always a chance that the newest "thing" in the tech world could be the one to hit the big time.
The fact that fintech is parented by both the technology and financial industries opens the door for endless possibilities. This is why big-money investments and venture capital firms are especially interested in fintech. It's safe to say that this technology will be watched closely.
Fintech is popular with small businesses and startups
Fintech is still relatively new, so, unsurprisingly, many of the companies using it are startups. This is quite common in the digital era, as technological resources create platforms that were previously attainable by small enterprises, often because they don't have the same budget to work with. Startups are nothing like banks; they provide solutions that concentrate on fundamental financial matters, such as international money transfers.
We live in what is very much the era of the small business owner. The internet has been an integral aspect of small business success, with ecommerce and social media providing the platforms to sell and market to a global customer base. So when you consider how essential technology and the internet have become, it makes sense that fintech – a product of both of those things – will lead the way for modern tech in its field.
New small businesses and startups are established every day, all of which have the potential to do great things in their industry. For investors, it's been essential to analyze the resources these companies are turning to for success – and the most recent to take note of it is fintech, so it only makes sense that they'll be investing in its future success. As more companies realize the benefits of fintech, their stock will continue to go up.
It has injected a sense of competition into the financial industry
When compared to other aspects of the financial industry, fintech is relatively new and stands to revolutionize all that has come before it. It's for this reason that investors and venture capital firms are excited about it. Fintech is something fresh and innovative, rather than using technology to update current financial methods.
One of the biggest benefits of fintech is the competition it has introduced into the financial industry. With access to this new technology, customers now have an alternative to large organizations and banks, which usually are more expensive options. This has meant that individuals and businesses on a tighter budget now have the platform they need to be more successful, whereas before they couldn't attain the financial services they needed to expand and evolve as a company.
Fintech, much like the internet, has injected a sense of competition and provided a level playing field for the little guys of the business world.
Venture capital investors are backing fintech
For many years now, mobile technology has been a key interest of venture capital firms and venture capital investors, but now it seems like much of that attention is swaying toward other technologies, such as fintech. But their investment isn't so much in the creation of the technology; that job is already done. Their focus is on the businesspeople who can implement fintech into the financial and business sectors to make money.
Due to regulatory difficulties and uncertainty concerning blockchain and cryptocurrency, VC firms are more likely to back fintech companies with a business model that meets regulatory approval and have ample experience in the financial sector. For investors, this means that their best bet is to work with venture capital firms who have a strong success record as well as a portfolio of companies in the fintech sector.
For the business world, fintech is much more than a new gadget, it's a revolutionary tool that stands to change the face of modern finance. Before fintech's birth, venture capital investors were very much focused on the technological side of things, but now that it's here and showing huge promise, those using fintech are a fair bet for success.