You may not think you are participating in a revolutionary experience when you transfer your friend $7 for food on Venmo. But since the advent of fintech, short for financial technology, the financial services industry has been turned on its head.
Whether purchasing coffee at your local coffee shop or managing your finances, fintech is all around us in 2019.
Fintech has been used for many of the newest technological developments - from payment apps like PayPal (PYPL - Get Report) or Venmo to even cryptocurrency. Combining the latest technological developments with financial services or applications, fintech has helped businesses - largely start-ups - disrupt the industry and provide better financial services to businesses and individuals alike.
But, what actually is fintech, and how is it being used in 2019?
What Is Fintech?
Fintech is a term used to describe financial technology, an industry encompassing any kind of technology in financial services - from businesses to consumers. Fintech describes any company that provides financial services through software or other technology, and includes anything from mobile payment apps to cryptocurrency.
Broadly, fintech describes any company using the internet, mobile devices, software technology or cloud services to perform or connect with financial services. Many fintech products are designed to connect consumers' finances with technology for ease of use, although the term is also applied to business-to-business (B2B) technologies as well.
Fintech has made inroads with dozens of applications and has changed the way consumers access their finances. From mobile payment apps like Square (SQ - Get Report) to insurance and investment companies, fintech has disrupted traditional financial and banking industries - and potentially poses a threat to traditional, brick-and-mortar banks or financial institutions.
Initially, fintech referred to technology that was applied to the back-end systems of banks or other financial institutions - but has since grown to encompass a plethora of other applications that are more consumer-focused. In 2019, it is possible to manage funds, trade stocks, pay for food or manage insurance through this technology (and often on your smartphone).
The tools provided by fintech are changing the way many consumers track, manage and facilitate their finances. In fact, according to data from 2016, people use between one and three apps to manage their finances. And, it seems as though investors are bullish on the industry. According to CNBC, fintech investment soared up 18% in 2017 alone.
For the estimated near 2 billion people worldwide without bank accounts, fintech provides a nimble option to participate in financial services without the need for the brick-and-mortar. And, to a large extent, that is precisely what fintech has been developed to do - give consumers direct access to their financial lives through easy-to-use technology.
But apart from budgeting apps, what are other uses of fintech?
So how is fintech being used in 2019, and what are some of its traditional uses?
1. Crowdfunding Platforms
Companies like Kickstarter, Patreon, GoFundMe and others illustrate the range of fintech outside of traditional banking.
Crowdfunding platforms allow internet and app users to send or receive money from others on the platform, and have allowed individuals or businesses to pool funding from a variety of sources all in the same place.
Instead of having to go to a traditional bank for a loan, it is now possible to go straight to investors for support of a project or company. And while their applications range from family and friends funding to fan and patron funding, the number of crowdfunding platforms have multiplied over the years.
2. Blockchain and Cryptocurrency
Cryptocurrency and blockchain are hallmark examples of fintech in action.
But in addition to crypto, blockchain services like BlockVerify help reduce fraud by keeping provenance data on the blockchain. And while cryptocurrency and even blockchain may be somewhat controversial uses of fintech, they have certainly taken parts of the investment world by storm in recent years.
3. Mobile Payments
It seems as though everyone with a smartphone uses some form of mobile payments. In fact, according to Statista data, the global mobile payment market is on track to surpass $1 trillion in 2019.
Using increasingly sophisticated technology, services have emerged that allow consumers to exchange money and payments online or on mobile devices - including popular payment app Venmo.
Fintech has even disrupted the insurance industry. In fact, insurtech (as it's been so called) has come to include everything from car insurance to home insurance and data protection.
Additionally, insurtech startups are increasingly attracting funding, with insurance startup Oscar Health securing some $165 million in funding in March of last year - at a $3.2 billion valuation, according to CNBC.
Additionally, popular personal finance company Credit Karma was valued at $4 billion, according to Forbes in 2019.
5. Robo-Advising and Stock-Trading Apps
Robo-advising has disrupted the asset management sector by providing algorithm-based asset recommendations and portfolio management that has increased efficiency and lowered costs.
Since the rise of more advanced technology that can analyze various portfolio options 24/7, financial institutions have adapted to offer online robo-advising services - including the likes of Charles Schwab (SCHW - Get Report) and Vanguard.
Additionally, other popular robo-advising services include Betterment and Ellevest.
Perhaps one of the more popular and big innovations in the fintech space has been the development of stock-trading apps. When once investors had to go directly to a stock exchange like the NYSE or Nasdaq, now, investors can buy and sell stocks at the tap of a finger on their mobile device.
6. Budgeting Apps
One of the most common uses of fintech in 2019 is budgeting apps for consumers, which have grown exponentially in popularity over the years.
Before, consumers had to create their own budgets, gather checks, or navigate excel spreadsheets to keep track of their finances. But after the fintech revolution prompted the development of financial services apps, consumers can easily and efficiently keep track of their income, expenses and other budgeting tools that have revolutionized the way consumers think about their money.
There are plenty of exciting fintech stocks - whether new to the market or tried and true staples.
PayPal has long been a favorite on the market, even despite recent weak forecasts for 2019. In fact, PayPal racked up some 267 million users worldwide as of the end of 2018 - adding some 31% more accounts for the year.
But apart from the mobile cash app, there are several other fintech stocks catching analysts' eyes.
And, of course, Chinese behemoth Alibaba is consistently a big fintech stock to know - and potentially own. "Alibaba is years ahead of any competitor in driving digital commerce forward," said MKM Partners analyst Rob Sanderson last year.
Additionally, Zelle - the person-to-person (P2P) app developed in response to cash apps like Venmo - signals the banking industry's retaliation to fintech startups. The Zelle platform is backed by a variety of banks, including heavy-hitters like Bank of America (MER-K) , BB&T (BBT - Get Report) , Capital One (COF - Get Report) , JPMorgan Chase (JPM - Get Report) , PNC Bank (PNC - Get Report) , U.S. Bank (UBS - Get Report) , and Wells Fargo (WFC - Get Report) .
Who Uses Fintech?
While many of us may have a budget app or two on our phone, who are the other users of fintech? And how is fintech being used in different ways?
B2B (Business to Business)
Before fintech was developed, businesses would go to banks to obtain loans and financing. But with the advent of fintech, businesses can easily get loans, financing and other financial services through mobile technology.
Additionally, cloud-based platforms and even customer-relationship management services like Salesforce (CRM - Get Report) provide B2B services that allow companies to interact with financial data to help improve their services.
B2C (Business to Client)
Of course, fintech has many business to client, or B2C, applications. Cash apps like PayPal, Venmo and Apple Pay all allow clients or customers to transfer money via the internet or mobile technology, and budgeting apps like Mint allow customers to manage their finances and expenses.
Much of the banking industry's first forays into fintech were focused on B2C applications like lending and payment services.
Fintech News in 2019
What's happening in the fintech space in 2019?
Well, for starters, one of the biggest M&A deals so far in the year happens to be in fintech. TheStreet reported in January that mega financial technology companies First Data (FDC - Get Report) and Fiserv (FISV - Get Report) will be merging into a combined $22 billion payments company.
But apart from fintech mergers, according to TechCrunch, there are now over 20 fintech "unicorns" - startups worth over $1 billion. These unicorns are led by fintech companies like Stripe, and are projected to continue growing in 2019 - as 2018 financing rounds propelled several more companies into the unicorn space. And, according to a TechCrunch analysis, there are some 40 more fintech companies on the verge of reaching unicorn status, who've all raised some $100 million in equity funding in 2018 - including companies like Stash, Betterment, Wealthfront and Lemonade.
Additionally, according to some predictions, 2019 will be the year for further development of AI (artificial intelligence) technology on both the consumer and back-end side of fintech.
A Special Invitation: Do you want to learn more about planning for and living retirement from the nation's top experts, including Ed Slott and Robert Powell, the editor of TheStreet's Retirement Daily? Want to learn how to create tax-efficient income in retirement and how to manage and mitigate all the risks you'll face in retirement? Then sign up to attend TheStreet's Retirement Strategies Symposium on April 6 in New York City. For a limited time, you can attend this extraordinary symposium for $149 -- a cost savings of $50 off the general admission price of $199. You can see the full day's agenda, learn about the guest speakers and sign up here for this special event.