What is FinTech and How Does It Work?

Technologies that deal with finances have been around for almost as long as the financial services industry. After the financial crisis of 2008, companies that applied cutting-edge technologies replaced traditional e-commerce service providers.

In this article, we consider what is FinTech, how it works, and what tech stands behind each of the modern financial services.

FinTech meaning is a financial product delivered through innovative technologies that makes relationships with money easier and faster. When you apply Apple Pay or your credit card to make an online purchase, you, as a consumer, the online store, and the bank that carries out the transaction are using financial technologies.

Fintech is a dynamically developing segment at the intersection of the financial services and technology sectors. The Fintech segment is rapidly evolving, disrupting the usual order of things in the traditional value chain.

Fintech companies, using the latest technologies and new directions of activity, are reshaping the competitive landscape. They are blurring the boundaries that have been established among players in the financial services sector.

The Fintech ecosystem includes such elements as startups, technology companies, financial institutions, and infrastructure players.

What is Financial Technology?

Financial Technology (Fintech) definition. FinTech's meaning lies in the provision of financial services using innovative technologies such as Big Data, artificial intelligence, machine learning, robotization, blockchain, cloud technologies, biometrics, etc.

It is software, applications, business models, and any other innovation that makes the relationship with money easier, faster, and more reliable.

Fintech is also an industry where companies use new solutions and technologies to compete with traditional financial institutions for customers.

Now financial technologies are becoming integral to all types of fintech as a service. Lending, payments and transfers, savings, investing, insurance, and others, transforming business models and increasing fintech customer experience.

Fintech solutions are being implemented by both large financial institutions, such as banks, and highly specialized fintech companies that provide a limited range of services. Such a technological transformation of the financial market requires a change in approaches on the part of the regulator.

Fintech Industry Statistics

Ex-head of Barclays (one of the largest banks in Europe) Anthony Jenkins, in 2015 announced that he expected significant changes in the financial sector, caused by fintech startups. These fintech businesses will be able to work better, faster, and cheaper than traditional companies. The result — is less staff in the banking area.

As history shows, the volume of investment in fintech is growing annually by more than 45% worldwide (according to Investment Bank). Following EY's Fintech Adoption study, about 1/3 of users like at least two digital financial technologies (globally). As to fintech popularity, the United Kingdom is leading so far (42%), Spain (37%), and Germany (35%). The European fintech sector is inferior to the American and Canadian. The list below shows the most popular fintech services.

- Mobile payments: 50% popularity rating;

- Online insurance: almost 25%;

- Fintech platforms for investment: 20%;

- Financial planning: 10%;

- Loan-oriented digital services: 10%.



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What Is a Fintech Company?

Fintech companies are companies whose activities are aimed at developing digital solutions related to the circulation of money. The fintech industry doesn’t include banks, even though they actually support it, finance it, and also compete with fintech solutions. This is because these are companies that operate on the Internet and don’t have physical branches serving customers.

The Fintech industry is dedicated to providing innovative financial solutions in the context of modern technologies. It seems relatively easy until we realize how broad this industry can be. Its range of interests includes, for example, e-commerce, online stores, smartphone fintech, bank account management, cryptocurrencies, and even car sharing.

Fintech consists of the following sectors:

- payments;

- corporate financial management;

- personal finance management;

- online exchange offices;

- credit companies;

- loans and credits;

- blockchain and cryptocurrencies;

- factoring;

- software providers.

The high level of innovation and economic growth means that our country is perceived as a Fintech driving force.

Who Uses Fintech Solutions?

Fintech uses tech tools to help customers, investors, and businesses and fintech startups with their financial transactions. These tools simplify consumers' finances.

The market becomes more transparent, and new opportunities open up for retail investors. Marketplaces for transactions with shares of private companies, tools for capital management, or financing of new business models, including digital assets.

The self-employed face problems obtaining financing: most banks don’t know how to work with those with unstable incomes. Fintechs can offer transaction-based scoring and credit solutions on platforms for freelancers, or risk management and financial stability tools.

There are two types of fintech users: consumers and business users.

B2B solutions

Sometimes people have turned to use banks for loans and various kinds of banking activities. Usually, all these procedures take a lot of time. Fintech technologies have simplified the procedure, and now you can receive financial assistance through a smartphone.

B2C solutions

Another option is for users who resort to fintech services provided by businesses. For example mobile payments PayPal or Apple Pay, and finance-oriented software like Mint.

A Brief History of the Fintech Industry

The history of modern Fintech developed in parallel with the crisis of 2008, but the first steps towards NFC chips sewn under the skin, allowing you to pay in the store, were made as early as 1950.


The first credit card payment system Diners Club Paper rectangles were used to pay bills in restaurants and for other entertainment. Thus was born the concept of an intermediary who is responsible for carrying out the calculations.


The first bank credit card. Was issued by Long Island Bank and could only be used in the New York area. The buyer handed the card to the seller, who wrote down information about the owner from the card on the sales receipt and called the bank for each purchase from the card if the buyer wanted to spend more than the established threshold limit.

the 1950s and 1960s

The formation of the technological environment for the creation of the first ATM Self-service gas stations, supermarkets, automated public transport fare collection systems, and candy vending machines are all the rage.


The first three ATMs: were in Sweden and two devices were in the UK — Barclaycash and Chubb MD2. To identify the user, plastic or paper tokens were used. ATMs worked every other time.


First electronic trading personal presence in the building of the exchange for participation in the “shout method” is losing relevance.


Distribution of "electronic cabinets" (mainframes) for accounting of financial data.


Mass Internet access and the formation of business models based on e-commerce methods. The rise of online brokers has replaced the old guys calling private investors.

In the 2000s, mobile wallets and payment applications, advisor robots, crowdfunding platforms as an alternative to the classic search for investments, and much more appeared. Fintech not only took on the optimization of the interaction between a financial institution and the end user of services but also replaced many services with new technological solutions.

In 2016, there were more than 7 thousand fintech startups in the world, 2500 were concentrated in Asia, and 4500 were divided between the UK and the USA. Money for the growth of the fintech movement is pouring in, confirming the interest of business in this sector of the knowledge economy. In 2008, investments amounted to $930 million, in 2013 - already more than $2.97 billion; $9.6 billion in 2014, and $22.3 billion in 2015.

In November 2008, Satoshi Nakamoto distributed among cryptographers a document describing the first electronic currency, bitcoin, and the principle of combining transactions, that is, any actions related to bitcoins, into blocks (blockchain).

In 2015, Vitalik Buterin created Ethereum, an environment for building online services based on self-executing (smart) contracts, another blockchain platform. He, like Satoshi, wanted people to abolish financial institutions.

Popular Examples of Fintech Services & Products

Fintech has most actively affected such sectors of the economy as consumer services, banking, money transfers, and payments. Also, the penetration of emerging technologies has affected insurance, asset, and capital management. Below we will look through popular examples of fintech.

1. Payments

A simple example – just a few years ago, entrepreneurs providing services via the Internet had to enter into agreements with banks that serviced payments from their partners' clients. Now everything is much simpler in fintech applications there are a large number of different financial services that allow you to accept and transfer payments in a variety of currencies and for a large number of platforms.

In addition, fintech allows non-financial organizations to expand their customer base. We are talking about food delivery, buying cinema and theater tickets, paying for parking lots, registering hotels, and much more. In this case, funds are withdrawn directly from the card, without using a mobile terminal. We all know that now you can pay for goods or services not only with a bank card, but also with a phone or even a smartwatch - you just need to bring the device to the wireless terminal, and the payment is made instantly.

About 10 years ago, international transfers were a real headache for both entrepreneurs and ordinary people. Now, payment apps such as PayPal, TransferWise, Stripe, and PaySend allow you to transfer large amounts of money from country to country, and the duration of the transaction in most cases is a few minutes.

2. Banking services and maintenance

Using modern technologies, banks are expanding the range of services offered, developing non-physical service channels (mobile banking), and developing new methods of working with clients. This may be, for example, opening an account without a client visiting a bank office and simplifying several operations.

The financial model has changed, and today customers pay exactly for what they get in the end: for certain services and services. In general, the BaaS market is currently developing very actively.

3. Lending

More recently, the same banks were the main source of lending. Now there are many more sources. Banking products still occupy the first position in the market in terms of demand, but startups are game-changers.

An example is CommonBond, a US company that provides student loan refinancing at low rates to graduates. Another startup, GreenSky, provides loans for home renovations, and Lendeavor lends to young dental professionals to start private practices

4. Insurance

Both startups and large insurance companies combine the latest technological solutions with classic insurance services. An example is the startup Spixii, which installs special sensors on its customers' cars that track driving style. The more extreme driving, the more expensive insurance. And vice versa, if the client drives calmly, without violating the rules, then he or she is provided with discounts on insurance services, and a larger compensation is paid.

Some insurance companies also provide discounts to customers who play sports. And activity monitoring is carried out with the help of specialized fitness trackers.

Online insurance is developing almost as actively as online banking. Moreover, companies that offer an online insurance service are gradually covering an increasingly large segment of the market. An example is the insurer DocPlanner, which in just a few years was able to launch a business in about 30 different countries.

5. Cybersecurity and User Identity

According to experts, cybercriminals will cause global economic losses of $10.5 trillion.

At the same time, while large banks can deploy their cyber defense infrastructure, it is not available to smaller organizations in the same volume. Therefore, the market for information security technologies, ready-made solutions that can be built into your infrastructure, is actively developing.

Technologies of predictive analytics, Big Data, and machine learning are being introduced. An ordinary information security expert is not able to analyze all the transactions of his organization, but a machine – yes.

Identification systems can secure clients of financial, insurance, and other organizations. And this market is also actively developing. Its volume by 2024 may exceed $50 billion. The Chinese company SenseTime Group alone has attracted over $3 billion in investments.

Technologies Behind Financial Products and Services

1. Big Data

Big Data technologies are one of the ways to increase the profitability of the banking business through an analytically proven adjustment of the product sales strategy and a shift in the vector of service provision from the general to the specific, including a customized approach to customer groups and timely consideration of their dynamically changing needs.

The use of Big Data tools and analytical models made it possible to significantly simplify such processes as building an anti-fraud strategy, predicting a decrease in demand, assessing the impact on sales of external economic factors or organizing loyalty programs, and others.

2 Artificial intelligence

Intense competition in the market and new customer requirements have led advanced top fintech companies to put their trust in artificial intelligence. Here are some institutions that technology is helping to modernize old services or offer new ones:

- In banks, AI serves customers in real time. Chatbots, voice, and virtual assistants are used not only for informing but also for money transactions.

- Credit companies use AI for person identification, assessing customers' creditworthiness, and exposing fraudsters.

- With AI, insurance companies automate the processing of insurance claims, identify risks, and detect insurance fraud.

AI-based tools allow fintech startups to compete with the above types of organizations or to develop cooperation through B2B. And in B2C, some intermediaries earn on the formation of complex services from many small ones provided by different companies.

In addition to the digitized financial sector, AI can set up any business processes for uninterrupted operation. For example, automate internal procedures, reduce processing time for unstructured and big data, reduce recurring costs, and generate reports.

3. Robotic Process Automation

RPA is a technology related to AI. It is an automation of repetitive tasks. These tasks require no special skills, so companies implement RPA and improve their business processes.

RPA helps to process financial information such as accounts payable and receivable. This robotic system does such work faster than a human, and its result is more accurate.

4. Biometric identification

Biometrics is a way to recognize a person by fingerprint, face, or voice. Such identification operates everywhere: from government agencies, banks, and retail to street surveillance cameras.

According to Juniper Research, in 2020, the volume of transactions made using biometrics reached $404 billion. And by 2023, according to forecasts, this figure will increase to two trillion dollars due to increased demand for remote transactions with biometric confirmation.

5. Tokenization

Cryptocurrency has turned from a trend into a tool that can bring real benefits to businesses.

In recent years, NFT tokens have gained popularity. A token is a certificate that gives the right to own an object, and the abbreviation NFT (Non-Fungible Tokens) means non-fungibility or, in other words, uniqueness.

Tokens are issued by musicians, artists, and the gaming industry. The benefits of their creation were appreciated by retail and large retail chains. For example, the Taco Bell fast food restaurant chain released a collection of NFT tacos that sold out instantly.

In the short term, NFTs are a way to attract buyers, and in the long term, they are a profitable investment. In addition, the token is a great way to analyze the demand for a new product. If the digital version is of interest to customers, you can start releasing the material version of the goods.

6. Cloud storage

Enhanced cloud security controls make it easier to perform day-to-day banking tasks.

The banking and financial sector requires the daily processing of large amounts of data - it is more convenient and cheaper to do this in the cloud. In this way, banks can turn large initial capital expenditures into smaller ongoing ones. In addition to a high level of information protection, fault tolerance, business continuity, and automatic backup, financial institutions can quickly develop, test, and implement new products.

Cloud computing allows non-critical services to be moved to the cloud, including software fixes, maintenance, and other issues. As a result, banks can focus on financial services rather than IT.

7. Blockchain technology

Blockchain is an innovative technology, involved in cryptocurrencies (digital money). Blockchain is already widely used for processing identification and personal data, also in marketing and gaming.

It contains all records of transactions. Unlike conventional databases, these records can’t be changed or deleted, only new ones can be added.

Blockchain is distributed ledger technology because of a chain of transactions and the list of owners on their computers. Even if one or more computers fail, the information won’t be lost.

Our Experience

SDK for a crypto wallet

One of our key objectives was to unify the business logic and leverage a single code base across various platforms. To accomplish this, we employed Kotlin Multiplatform technology, enabling us to utilize consistent business models, processes, queries, internal data processing, and encryption across all target platforms.

By consolidating the business logic, we achieved:

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For instance, the uniform processing of high-precision digital values was maintained on both platforms.

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The objective in designing CopeCart client apps was to create a versatile tool for monitoring e-sales performance, enabling account holders to establish goals and receive notifications. The primary non-functional requirement emphasized by the customer was the seamless operation of the app, with a specific emphasis on a smooth interface.

Developing native applications for established businesses offers several advantages. Firstly, it facilitates product scalability, and secondly, it ensures stability and efficiency, especially when adhering to best practices in app development.

Additionally, finding a specialist to support and evolve the product in the future is not expected to pose significant challenges. Hence, our choice to develop native applications for CopeCart aligns with these considerations.

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At the heart of the digital transformation of financial services, the sector is new financial technologies (or fintech) that are changing the way you invest, lend, and save money. They allow the modernization of traditional types of financial services and the way they are delivered. Experts note that the development of financial technologies is not an accident, but a response to the urgent needs of modern generations who want to save time and money by receiving services in a digital format. The fintech business model is opposed to the universal bank model and is a response to some of the "failures" of the traditional financial services market.

The development of financial technologies in the world is supported by technological factors. In particular the use of the Internet and smartphones, cloud computing technologies, robotic process automation, machine learning, big data analysis, etc. Due to their highly innovative ability, financial technologies create a powerful incentive for the "digital renewal" of the entire financial sector, including improving the quality of financial products and services, as well as reducing their prices.

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