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What is Fintech and how does it work?

Derek Watson
Derek Watson
Investment opportunities in Fintech

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What Is FinTech? The Basics

What is Fintech and how does it work?

Fintech, or financial technology, is an industry that is constantly evolving and revolutionizing the way we handle our financial affairs. From mobile banking to investment apps, fintech is making it easier and more convenient for people to manage their money. In this article, we’ll explore the basics of fintech, its history, current use cases, and what the future has in store for this exciting industry.

The Basics

Fintech, short for financial technology, is a rapidly growing industry that uses technology to improve and automate financial services. This can include a wide range of applications, such as mobile banking, online payment systems, investment and trading platforms, and financial management tools. Fintech companies often use data analytics and artificial intelligence to improve the efficiency and effectiveness of their services.
One of the most significant aspects of fintech is its ability to provide financial services to individuals and businesses that may have previously been excluded from traditional banking and financial services. This includes people with limited access to physical banks, individuals with poor credit history, and small businesses that may not have the resources to navigate traditional banking processes.
Another important aspect of fintech is the use of digital platforms and apps to make financial transactions and management more convenient for customers. This includes mobile banking apps, digital wallets, and online investment platforms, which allow customers to manage their finances from anywhere and at any time.
Fintech companies also use innovative technologies like blockchain and biometrics to improve security and reduce the risk of fraud. This includes using blockchain to record financial transactions and biometrics for identity verification, which helps to prevent identity theft and other types of fraud.

What it is

Fintech companies aim to disrupt the traditional banking and financial services industry by offering faster, more convenient, and more cost-effective solutions to consumers. They use technology to automate processes and provide real-time information, making it easier for customers to manage their finances. Fintech solutions can be used to improve the accessibility of financial services, such as providing access to loans and credit for individuals who may not qualify through traditional channels. They also provide innovative solutions for businesses, such as digital invoicing and cash flow management. This allows for a more efficient and streamlined approach to financial transactions and management.


The early 2000s saw the rise of online payment systems, such as PayPal, and mobile banking apps. These innovations made it easier for people to manage their finances on-the-go and opened up new opportunities for businesses to offer financial services online.
In the 2010s, advancements in technology, such as big data analytics and artificial intelligence, allowed fintech companies to offer more sophisticated services, such as predictive analytics and personalized financial advice. This led to the rise of robo-advisors and other digital-only financial services.
In the past few years, there has been a significant increase in investment in fintech, with venture capital and private equity firms pouring billions of dollars into the industry. This has led to the growth of a wide range of fintech startups, offering everything from digital banking and payments to insurance and lending.
With the increasing adoption of fintech, the industry is expected to continue growing in the future, as more people turn to digital financial services for convenience, security, and innovation. As the trend of digitalisation continues, it is expected that traditional financial institutions will increasingly adopt and integrate fintech solutions to keep pace with the changing market.

Use Cases

Mobile banking apps are one of the most popular fintech use cases, allowing customers to easily manage their accounts and perform transactions on their smartphones. Online payment systems, such as PayPal and Venmo, have also become widely adopted, making it easy for people to send and receive money digitally. Investment platforms, like Robinhood and E-Trade, have made it easy for individuals to invest in stocks and other securities, while robo-advisors, like Betterment and Wealthfront, use algorithms to provide automated investment advice.
Another important use case for fintech is providing financial services to underbanked and underserved communities. For example, companies like M-Pesa and PayPal have developed mobile money services that allow individuals in developing countries to access banking services through their smartphones. Other fintech companies, like LendUp and Kiva, are working to provide access to credit and loans to individuals who may not have access to traditional banking services.
Fintech has a wide range of use cases, from mobile banking and online payments to investment platforms and financial management tools. Some popular examples include mobile apps for budgeting and saving, online lending platforms for personal and business loans, and robo-advisors for investment management. Additionally, many fintech companies are working to improve financial inclusion by providing services to underbanked and underserved communities.
Overall, the use cases for fintech are vast and varied, and the industry is constantly evolving to meet new needs and challenges. The use of technology in financial services is helping to make the financial system more efficient, accessible, and user-friendly for everyone.


In recent years, fintech has seen several breakthroughs that have changed the way we think about financial services. One of the most notable examples is the rise of mobile banking and online payments, which have made it easier for people to access financial services from anywhere. Another breakthrough has been the use of robo-advisors, which have made investment management more accessible to the general public. Additionally, blockchain technology has the potential to revolutionize the way financial transactions are conducted by providing a secure, decentralized way to store and transfer data.
One of the biggest breakthroughs in fintech in recent years has been the development of blockchain technology and cryptocurrency. However, this space has also seen some major controversies, such as the FTX scandal in 2022 where the cryptocurrency exchange was forced to file for bankruptcy due to fraud and mismanagement. This has led to increased scrutiny and regulation in the crypto industry. Another major player in the crypto space is Binance, one of the largest cryptocurrency exchanges in the world. Despite facing some legal challenges, Binance continues to dominate the market and expand its offerings to include a range of financial services. The incident of FTX and Binance have made it clear that the crypto and blockchain space is still in its early stages and is still heavily regulated.

Biggest Companies

The biggest players in the fintech industry can vary depending on the sector.

Mobile Banking:

Monzo, N26 and Revolut are some of the biggest players in the mobile banking space, offering digital bank accounts and financial services to consumers through mobile apps.

Chime and Varo Money are also popular mobile-first banks in the US, with a focus on providing accessible banking services to underbanked communities.


Robinhood and eToro have become popular among retail investors for their user-friendly platforms and commission-free trading.

TD Ameritrade and Charles Schwab are also big players in the online trading space, offering a wide range of investment products and tools for both novice and experienced traders.


Klarna, Afterpay, and Square have been some of the biggest players in the buy now, pay later (BNPL) space. They offer customers the ability to split the cost of purchases over a period of time, with the option to pay in instalments.

Affirm and Sezzle are also popular BNPL providers, with a focus on providing financing options for e-commerce and brick-and-mortar retailers.


Binance and Coinbase are two of the largest cryptocurrency exchanges in the world, offering trading in a wide range of digital assets.

Kraken and Bitstamp are also prominent players in the crypto exchange space, with a focus on providing secure and reliable trading platforms for both individual and institutional investors.

Wealth management and personal finance:

Betterment and Wealthfront are popular robo-advisors, offering automated investment management and financial planning services to individual investors.

Personal Capital and Mint are also big players in the personal finance space, offering budgeting and financial management tools for consumers.


Lemonade, PolicyPal and Trov have been some of the biggest insurtech companies, offering innovative insurance products and services to consumers through digital platforms.

Metromile, Root and Clearcover are also popular insurtech companies, with a focus on providing more affordable and customizable car insurance options.

Blockchain and cryptocurrency:

Ripple and Ethereum are two of the largest blockchain companies in the world, with a focus on creating decentralized digital assets and platforms for financial transactions.

Chain and Corda are also big players in the blockchain space, with a focus on providing enterprise-grade blockchain solutions for financial institutions and other organizations.


Trulioo and IdentityMind are some of the biggest players in the regtech space, offering compliance and identity verification solutions for financial institutions and other organizations.

ComplyAdvantage and Onfido are also prominent regtech companies, with a focus on providing anti-money laundering (AML) and know-your-customer (KYC) solutions.

Business lending:

Kabbage and OnDeck have been some of the biggest players in the business lending space, offering short-term loans and lines of credit to small and medium-sized businesses.

BlueVine and Fundbox are also popular business lending companies, with a focus on providing flexible financing options for e-commerce and other businesses.

Real estate:

Zillow and Redfin have been some of the biggest players in the online real estate space, offering home search and valuation tools to buyers and sellers. and are also big players in the real estate industry, with a focus on providing comprehensive real estate listings and information to consumers.

Supply Chain finance:

Tradeshift and Taulia have been some of the biggest players in the supply chain finance space, offering invoice financing and other financial services to

What the Future Has in Store

The future of fintech is hard to predict, but it is expected to continue growing and evolving. The use of artificial intelligence and machine learning is expected to become more prevalent in fintech, leading to more personalized and efficient services. The increasing adoption of blockchain technology is also expected to bring more transparency and security to financial transactions. Additionally, there is expected to be a rise in the use of open banking platforms, enabling customers to access their financial data from multiple sources within a single platform. In addition, the use of BNPL and other digital wallets is expected to increase as more people shift towards online shopping. Another major trend expected to shape the future of fintech is the growing adoption of digital currencies, with many experts predicting that they will become more widely accepted as a form of payment in the coming years. Overall, the future of fintech is expected to bring more convenience, security and financial inclusion to consumers and businesses alike.

Investing in Fintech startups:

Investing in fintech startups can be a highly profitable endeavor, as the industry is projected to continue growing in the coming years. One of the main advantages of investing in fintech startups is the potential for high returns on investment. Many fintech startups have disrupted traditional financial services, creating new markets and generating significant revenue. Additionally, fintech startups are often at the forefront of innovation, utilizing cutting-edge technology to create new products and services.
Another advantage of investing in fintech startups is the potential for diversification. As the fintech industry is vast and covers many different sectors, investing in a fintech startup can provide exposure to a variety of markets and industries. This can help to spread risk and increase the chances of a successful investment.
Investing in fintech startups can also provide access to talented and experienced teams. Many fintech startups are founded and led by individuals with extensive experience in the financial services industry, providing investors with a valuable resource for understanding the market and making informed investment decisions.

In conclusion

In conclusion, the fintech industry has come a long way since its inception in the late 1980s. Today, it encompasses a wide range of technologies and services that are aimed at improving the efficiency and effectiveness of financial services. From mobile banking and online payments to investment platforms and financial management tools, fintech companies are using cutting-edge technology to make financial services more accessible and user-friendly for everyone.

Fintech startups

If you are an Fintech, there are many potential opportunities for investment from venture capital firms, angel investors, and other potential investors. As Fintech continues to grow and evolve, startups in this space may be attractive to investors looking to invest in companies with promising technologies and business models. As a startup, it may be helpful to actively seek out investors who are knowledgeable and experienced in the Fintech industry and can provide financial support, strategic guidance, and connections. Ultimately, finding the right investors can be a crucial step in helping your Fintech startup succeed and grow.

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