What is a Fintech Application? | Definition and Insights for Business Owners
Read our guide to fintech and learn what types of fintech applications companies are using to power their growth.
Unless you’ve been living under a rock, you’ve probably heard the term “fintech” being used all over the place. Fintech is one of the most exciting areas of technological development today.
Finance has always been a data-rich and innovative sector, so no wonder that now it inspires the creation of the most advanced solutions.
But what exactly is fintech? What is a fintech application? And what does finance app development look like?
In this article, we answer these questions and share a detailed overview of this exciting tech area. Read on to find out everything you need to know about what’s happening at a crossroads of finance and technology right now.
Table of contents
- What is fintech? And what is a fintech application?
- Benefits of fintech apps
- Fintech statistics
- Types of finance applications
- Fintech application case study
- Fintech development – 5 best practices
1. What is fintech? And what is a fintech application?
“Fintech” is a combination of terms “finance” and “technology.” It refers to any business that takes advantage of technological solutions to build, automate, or improve financial services and processes.
The term “fintech” is relatively broad, and since the industry is growing rapidly, we see new services and applications emerge every year for both consumers and businesses. From InsurTech and cryptocurrency to mobile banking and investment apps, expect fintech to take on many shapes and sizes.
When you think about fintech, you’re probably imagining startups that use cutting-edge technologies. But traditional finance companies and banks are now adopting fintech services as well.
Is fintech really such a brand-new industry? It’s certainly one that has evolved really quickly during the last decade. However, technology has always supported the financial sector. Just think about the introduction of credit cards, ATMs, electronic trading, personal finance applications, and high-frequency trading during the last few decades.
Fintech applications vary greatly from project to project. Many of them use machine learning algorithms, data science technologies, and cutting-edge solutions like blockchain to carry out various tasks such as processing credit risks or running hedge funds.
2. Benefits of fintech apps
Fintech uses mobile connectivity to improve the convenience and efficiency of online transactions. An increasing number of consumers are using tablets and smartphones to manage their finances. Fintech apps can help them streamline these processes, achieve more, and get a better experience.
Companies that build fintech apps usually add data analytics solutions to them. This allows to easily trace and address the evolving customer needs. Thanks to all of this data, businesses can deliver truly personalized experiences and products to consumers. Entire business models are now being built based on access to a wide range of customer information.
Quicker rate of approval
Fintech apps increase the accessibility of different finance products to consumers by speeding up the rate of approval. This is relevant to banking and insurance products. Companies use fintech applications to automate and speed up the approval process so that it can be completed even within 24 hours.
If there’s one thing all fintech applications have in common is their focus on security. Companies are using the latest and safest mobile technologies to build their products. They invest in security to make sure that consumer data is kept safe. Biometric authentication and data encryption are the most common security measures used in this context.
Fintech companies can offer their customers the advantage of lower fees than traditional banks. That’s because they don’t have any brick-and-mortar costs such as advertising or rent. Instead, they can invest all of their revenue into product development to enhance their offer.
3. Fintech statistics for 2020/2021
- The global financial sector will be worth $26.5 trillion in 2022, growing at a CAGR of 6%.
- The market share of the 48 most prominent fintech unicorns is worth more than $187 billion, as of the first half of 2019. This represents slightly over 1% of the global financial industry.
- 60% of credit unions and 49% of traditional banks in the United States believe that partnering with fintech companies will be important for the future.
- What is the most significant fintech product? Digital payments, without a hint of doubt. It amounts to 25% of the fintech market.
Fintech and mobility
- By 2022, mobile transactions will grow by 121%. As a result, they will make up 88% of all of the banking transactions.
- Consumer spending in app stores will increase by 92% to reach a smashing $157 billion globally in 2022.
- By 2022, more than 78% of millennials in the United States will become users of digital banking solutions.
- Banking-related chatbot interactions will increase by 3150% between 2019 and 2023.
- Thanks to chatbots, the operational cost savings in banking will reach $7.3 billion globally by 2023.
4. Types of finance applications
Take one look at the fintech scene, and you’ll see that fintech is transforming a wide range of financial services today. It not only affects business models and product offerings but also how consumers manage their finances. Here are the most important types of finance applications today.
Payment applications are changing the entire industry thanks to new digital processing solutions and networks. They facilitate better digital connectivity, lower processing costs, and ensure consumer identity protection. Asset management and processing payment transactions are key areas of focus here.
Another field where fintech has a huge impact is in mobile technologies related to payments. Practically every transaction made by a consumer will involve payment processing. Mobile wallets and similar integrated payment solutions are now used by many consumers and businesses. They’re secure, easy to use, and offer a great user experience.
Mobile payment platforms transcend the barriers of traditional methods. Without them, many of the transactions we make today would be difficult to complete. Some of the most famous digital wallets are Google Wallet and Apple Pay.
Read this too: How Mobile Apps Help in Digital Transformation Success
Personal wealth management
This area of fintech applications concentrates on improving the wealth management processes of both businesses and individual consumers. Personal wealth apps are mobile applications that deliver a broad range of functionalities to help people manage their finances securely and quickly. Cnsumers and companies use them to manage their investment processes and portfolios.
Many traditional banking institutions are embracing digital technologies to improve their services. They invest in mobile apps that offer accessible banking solutions and products. This type of fintech apps helps to boost the user experience, reduce costs, and removes the friction from operations over the traditional means of banking (which often leave consumers dissatisfied).
Blockchain solutions such as peer to peer transactions, smart contracts, blockchain-powered trading platforms, immutable records, and decentralized ledgers have become a significant element of today’s finance landscape. This cutting-edge technology that offers a transparent method of tracking the entire lifecycle of financial transactions. Thanks to its decentralized and distributed nature, it is also gaining increasing trust of consumers.
Fintech applications offer a lot of value for the insurance industry, which is now adopting digital solutions to improve the customer experience and increase operational efficiency. Insurance companies are using smartphone apps, Internet of Things (IoT), and artificial intelligence to offer more impact with their services. These technologies are changing how insurance products work and offer advantages such as more personalization, customized offers, and online marketplaces.
Regulatory applications (RegTech)
RegTech was created in 2015 by the Financial Conduct Authority. It’s a subset of fintech that concentrates on building technology that improves the delivery of regulatory requirements. This field uses innovative solutions for better compliance and delivery of secure, cost-effective, and easy-to-integrate regulations. It aims to standardize and improve the transparency of regulatory processes – as well as to some extent automate features such as risk management, transaction monitoring, or regulatory reporting.
This area focuses on developing different applications that offer lending solutions to businesses and consumers. The main idea is to streamline the process, making it more personalized and accurate. Smart platforms that use AI and machine learning algorithms can process and verify identity credentials to avoid making any errors. Such technologies also help to forecast income prospects, assess the borrower’s track record, appraise collateral value, and make predictions about the changes in their capabilities.
Fintech is also revamping the trading sector. Such solutions are designed to reduce the cost of international trade, increase transparency in trading, and facilitate trade finance. Some of the most impressive applications we’ve seen so far support cross-border trading with the help of IT systems and smart distribution platforms. Moreover, solutions such as robot advisors could be a great help to beginner investors in managing risk.
5. Fintech application case study
HoneyBee – personal finance app offers a fast way for users to get an advance on their next paycheck or an emergency loan.
The idea here was helping employees access an extra week’s pay at any time of the month to help them manage unplanned expenses and build credit, regardless of their credit history. Our team focused on creating a mobile app design that would be simple and streamlined. We wanted to make the process of requesting a payment advance or emergency loan as quick and easy as possible. Employees can now complete the entire process in 15 minutes or less.
Our designers created a user-friendly and convenient method for filling out forms. Thanks to our Quality Assurance process, as well as the newly introduced mobile QA multitool, Hyperion, we delivered a crash-free app with clean and maintainable code and a consistent UI.
6. Fintech development – 5 best practices
Craft a strategy for growth
It might be tempting to choose the quickest way possible when developing your app to bring it to market before anyone else does. However, if you don’t dedicate enough time to planning, it might impact your short and long-term success.
First of all, make sure that your framework and coding are carried out with scalability and expansion in mind. Be optimistic about the future of your app during the initial launch. If your app becomes popular quickly, you don’t want to serve your users downtime or clunky updates. That way, business owners can easily lose the momentum that the launch started. So, craft your strategy for growth right from the beginning.
Invest in UX and UI
Designers often say that bad UX ends up costing more than good UX. This is true, especially for finance apps that often deliver more complicated features and services involving money.
It’s is essential that your app offers a smooth customer experience and looks professional. If you end up with a poor experience, it will cost you your reputation (and even more money to fix it). Do yourself a favor and hire an experienced UX and UI designer who will help you navigate the rigorous testing processes for successful UX development.
Read this for more insights: How much does it cost to develop a mobile app in 2021?
Test your app
Ensure that user testing and feedback sessions cover all the possible demographics of your target audience. Be prepared for unexpected verticals to access your product.
For example, you might be building an investment app for millennials who are just starting their education in the market but are digitally proficient. It’s smart to consider that your app might be used by someone else. For instance, by some slightly older people who are in the same position investment-wise but might be not as used to mobile apps as Millennials.
That’s why an intuitive UX and easy-to-understand functions are essential for your product, no matter how digitally-savvy you expect your target audience to be. Overlooking such target groups can make a huge difference in the performance of your app.
Focus in security
Keeping a fintech app secure will give your users the confidence that their data – and, more importantly, their money – is in good hands.
Your app needs to have industry-grade encryption and security protocols. Make sure to introduce safe access to accounts and innovative authentication practices. You can even add a password generator that adds random strings of text users can use exclusively within the app.
Educate your users about security as well. Implement multifactor authentication to ensure that the right user is granted access to the app. Whether it’s a physical security token or cutting-edge biometric solution, you need to make sure that your app can verify user identity securely.
Don’t forget about compliance
This is a requirement specific to fintech applications. Any company that offers products or services to the European Union citizens needs to follow strict rules on consumer data privacy like the GDPR. For fintech apps, it means that user data such as banking information, profile image, name, or identifiable computer data like IP address needs to be stored and processed securely. If you fail to comply with the GDPR, you’ll be facing very steep fines.
One of the key principles of this regulation is privacy by design. This means that the mechanisms that process user data should be built with privacy in mind from the ground up. If you follow the regulation, your users will have peace of mind knowing that their personal data is stored and accessed privately and securely by design.
Read this too: 12 best practices for e-commerce mobile app development
7. What is a Fintech Application? Conclusion
Fintech is one of the most exciting technology fields today because it attracts a broad range of cutting-edge solutions that offer new products and reinvent traditional banking services.
If you’re looking to create a fintech application, make sure that you team up with a reliable and trustworthy partner that has experience in delivering fintech apps. Check on how to choose a mobile app development company for your project.
At Droids On Roids, we have ample experience in finance applications, and our teams are ready to help you realize your idea.
We have delivered over 130 mobile and web applications to clients located in different regions of the world, such as the United States, Australia, and Europe. When it comes to fintech, we know what we’re doing. Get in touch with us to get help from an experienced team that will help your application take off and scale.