Financial technology, or fintech for short, has an extremely broad meaning and quite a long history. If we go back to the 1950s, when the first data analysis and credit cards were introduced, people called them “fintech.” Today, some people have several plastic cards, and analytical tools are now powered by artificial intelligence. Thus, the term “fintech” has evolved together with the overall technological progress. The most modern solutions include blockchain, cloud services, and the Internet of Things (IoT). These tools contribute a lot to the convenience of financial systems.
However, this progress is not as smooth and neat as it may seem. Creating a global financial infrastructure involves a lot of risks that all organizations must take into account. These problems may not be that vivid today, but they can backfire in the long run. Check out the article to find out how fintech can be beneficial and what negative consequences to expect from it.
Advantage #1: Making money
Well, this advantage is the most obvious one. With the top-notch technologies on the market, the financial sector can generate extreme amounts of money. Besides transforming and improving the existing ways finances function (banking systems, trading, sales transactions), fintech brings new opportunities to engage in the economy. The most recent examples are blockchain, cryptocurrency, and non-fungible tokens (NFT).
Also, fintech creates favorable circumstances for the unbanked population to join the formal financial processes. With the immense spread of mobile phones and the Internet, financial technologies can provide people with simpler loan processing and other transactions.
Advantage #2: More democratic economy
Even though it’s already the 21st century, not every person has equal opportunities to engage in economic activities. There are plenty of factors that affect this situation. They include the overall economic situation in the country, the level of unemployment, the legal regulations, and, well, pure luck. With fintech, their influence can be reduced to a minimum.
Advantage #3: Promoting transparency
It’s not a secret that the financial world is full of unregistered, abusive, and illegal activity. Unfortunately, due to the complexity of the system, it becomes really hard for a human to track down these operations. That is why artificial intelligence (AI) was introduced to fintech. With its help, it becomes way easier to detect suspicious patterns.
However, creating such a complex AI-powered fintech solution can be a tough task to complete. To make sure that your service will be able to perform its functions, you can partner with a fintech software development company that will ensure your project’s high quality.
Disadvantage #1: Global inequality
The first drawback that can stem from fintech is connected with the first advantage we mentioned. Smartphones are widely used by a lot of people, but there is still a huge segment of the world population that can barely afford a phone. It means that someone will be left behind. However, the technologies are developing rapidly and becoming cheaper, so the situation can change in a positive direction.
Disadvantage #2: Privacy concerns
You may not be fully aware of it, but the amount of information you leave behind in a digital world is enormous. Your online purchases and transactions provide banks with an extensive pattern of your behavior. Some third-party organizations that can obtain this information (due to a leak, for example), can learn your personal information and follow you without your consent.
Wrapping it up
It was a quick introduction to the most crucial advantages and disadvantages of the modern evolution of financial technologies. The list can be continued with more examples of good and bad use cases, but the ones we mentioned will have a bigger influence on the world. Anyway, fintech is unstoppable, so we can only support its benefits and be aware of its drawbacks.