What is Fintech: Definition, Types, and Benefits for Society

In this era of all-technology, many new startups have been built, especially in the fintech field. Fintech is an acronym for financial technology. In essence, fintech is one of the companies engaged in financial services that has been combined with technology. Let’s see the explanation in this article.


1 Definition of Fintech: Fintech Is…
2 Benefits of Fintech in Society Are…
2.1 Helping the Development of Startup Companies
2.2 Improving the Standard of Living
2.3 Ease of Financial Services
3 History of Fintech
3.1 Fintech 1.0
3.2 Fintech 2.0
3.3 Fintech 3.0
4 Types of Fintech Developing in Indonesia
4.1 Payment, Clearing and Settlement
4.2 Market Aggregator
4.3 Risk and Investment Management
4.4 Crowdfunding
5 Applications of Fintech in Companies and the Financial Industry
6 Conclusion

Definition of Fintech: Fintech Is…

Basically, there is no new definition of fintech itself. However, the National Digital Research Center or NDRC explained that fintech is a term that can be used to describe innovation in the financial services sector.

This form of innovation can also be referred to as financial innovation which is given a touch of modern technology. But it can also mean a segment in the startup world that is able to help maximize the use of technology with the aim of changing, sharpening, or accelerating various aspects of financial services.

So, fintech includes payment methods to fund transfers, fundraising, lending funds, to asset management that can be accelerated and shortened by utilizing technology.

Based on this understanding, it is not surprising that fintech has quickly become a community need and in the end is able to change people’s lifestyles, especially those who are engaged in finance and technology.

The Benefits of Fintech in Society Are…

There are various reasons that can cause fintech to become an influence on people’s lifestyles. The following are the benefits of Fintech  in society:

  • Helping the Development of Startup Companies

Today, there are many new startup companies that have emerged and have given birth to innovative products in the fintech field. An example is Moneythor. This company makes new products that can provide experience in the field of digital banking with more specific and detailed analysis results. Usually, companies like this start to grow in Singapore, which then targets Asia.

  • Improving Living Standards

In addition to being able to bring in large profits or income for startup companies, the existence of fintech is also able to increase people’s living standards and purchasing power.

An example is a startup company that is then able to increase innovation to present merchants, where the merchant is able to accept payment systems with debit or credit cards at low costs.

In addition, there are also startup companies that are able to create fintech innovations by improving the infrastructure of the banking world to increase the purchasing power of consumers and the public. In addition, fintech also has an important role in efforts to reduce the poverty rate to 600 million people. In addition, startup companies must also convince investors of this.

  • Ease of Financial Services

Another benefit offered by fintech is the convenience of financial services. Try to compare it with ten years ago. When you want to transfer some funds, do you go to a bank teller or an ATM machine?

In fact, both of these things are quite inconvenient because it takes a long time. In addition, you also have to queue which makes you waste more and more time.

However, now this can be minimized with the existence of fintech. Because you can transfer some money with just a smartphone. In fact, some fintechs also provide monthly billing features, such as electricity, telephone and BPJS.

So, you can save more time and energy because you don’t have to always leave the house to make various transactions.

History of Fintech

  • Fintech  1.0

At first,   fintech started in 1866 which at that time utilized the installed transatlantic telegraph cable. The cable enabled globalization from 1866 to 1913.

Five years later, in 1918 to be exact, an electronic delivery system called Fedwire was born. Then in the 1950s, there was a big change in the remittance system with the creation of credit cards.

  • Fintech  2.0

In the next period, the development of fintech was continued with the creation of Automated Teller Machines or ATMs in 1967. The existence of this fintech development was in line with the development of the internet and e-commerce.

Because the development of the internet is quite fast, then in the 90s many e-commerce began to appear. In addition, there are also many internet banking services and online stock selling sites. However, this era had stopped when there was an economic crisis in 2008.

  • Fintech  3.0

After the economic crisis in 2008, the development of fintech entered the next stage. At that time, many people did not believe in the world of traditional banking. This gap is then used as an opportunity by many people to give birth to startups in the financial services sector, such as online payment services, online loans, crowdfunding, etc.

In 2009, bitcoin emerged as an alternative form of investment. This era is also supported by the birth of smartphones that allow users to use mobile banking from the early 2000s.

Types of Fintech  Developing in Indonesia

After you understand the benefits of fintech, now you also have to know all the types of fintech  that are currently developing in Indonesia, namely:

  • Payment, Clearing, and Settlement

This one fintech is certainly no stranger to our society. Some of us may also be unaware that we often use this type of fintech on a daily basis. However, this fintech is usually used more often to make payments at various merchants, such as payments for public transportation, or online motorcycle taxis.

So, maybe you have not been aware that you have used this type of fintech every day in your various daily activities. Therefore, fintech is able to make it easier for you to carry out various daily transaction processes.

  • Market Aggregator

This type of fintech plays an important role as a comparison for a financial product, where this type of fintech will collect various financial information and data that will be used as a reference by users.

However, the information that will be provided is only about financial tips, etc. This type of fintech is also made so that you can get even more accurate information before finally choosing the right financial product.

  • Risk and  Investment Management

This type of fintech has an initial concept like a financial planner in digital form. Its function is to make financial planning more practical and easy, so you can monitor it wherever and whenever you want.

  • Crowdfunding

The last type of fintech is crowdfunding. This platform plays an important role in bringing together parties who really need funds with other parties who will provide funds. The transaction process also tends to be easy and safe.

As we all know that capital is one of the important aspects in developing a business that is currently running. Therefore, this fintech will make it easier for people, especially those who have SMEs, so that they will find it easier to apply for loans easily than applying for loans from banks.

Application of  Fintech  in Companies and the Financial Industry 

In addition to startups, banking companies and other large companies are also starting to integrate technology in the traditional financial sector to make it faster, safer and more efficient. Some examples are as follows:

  • digital bank. Currently, there are many new types of banks that allow you to access all banking features with your smartphone. Some of the main features are expense analysis, smart savings, cashback, multi-currency support, and other security features.
  • Mobile payments. The application of this technology allows for various types of payments to be made using mobile applications.
  • Robot advisor. This Robo advisor tends to function as a digital-based financial advisor that uses AI and machine learning technology in order to assist users in managing fund investments based on risk, investment amount and investment objectives.
  • InsurtechThis fintech innovation is also carried out in the insurance industry in order to increase efficiency, reduce costs, improve risk assessment, and provide a better experience for its clients. Usually, this insurtech covers auto insurance, data security, home, etc.
  • Digital lending and credit. This is one example of technology in the banking world that is more open and provides easy access to loans without having to be involved in traditional banks.
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