The Definition of the Currently Booming Financial Technology

In the past few years, the term financial technology (fintech) is currently booming in Indonesia. The development of advanced technologies should be credited as the cause behind the fintech boom. However, have we understood the real definition of financial technology itself?

We commonly associate financial technology with companies that offer technology-based financial services. However, both things are completely different. When we talk about financial technology, we should instead focus on the financial technology of these companies. As for the companies themselves, companies that provide financial technology services in Indonesia are usually known as Digital Financial Innovations (Inovasi Keuangan Digital/IKD) providers.

Despite its nascent development in Indonesia, the utilization of financial technology dan its companies has gone popular. Financial Services Authority (Otoritas Jasa Keuangan/OJK) also handles the growth of IKD providers in Indonesia, so that the security of fintech companies in this country can be guaranteed.

Through OJK, the Indonesian government expects a substantial growth of IKD in this nation, while also maintaining its companies’ security so that IKD providers can be trusted by society.

What is the Definition of Financial Technology?

Financial technology is any kind of new technology intended to perform automation in financial services. At its basic definition, fintech is used to assist companies, business actors, and consumers in managing and performing financial transactions in an easier manner. As befitting its name, fintech relies on operable software, application, and algorithms in computers and smartphones.

The emergence of fintech is something new, considering its conception in the 21st century. The term fintech is previously used for back-end technologies in financial institutions like banks. Since then, fintech’s presence is expanded so that more consumers can use its services. Moreover, fintech is now present in numerous economic sectors throughout the world, beyond its original uses in banks.

An example of fintech is the increasing number of mobile banking features in the past few years. Decades ago, not everyone can use internet-based services to perform transactions such as money transactions or bill payments. Today, almost everyone can utilize the fintech technology that makes their time management more efficient.

Usually, we identify fintech as a platform to perform financial transactions, such as paying bills, transferring money, purchasing things, and many others. However, fintech now also includes investment activities that are marked by the abundance of investment applications in its systems. Apart from that, fintech is also used in online fundraising and robo-advisors.

Read also: Understanding Financial Software Provider

Technologies in Fintech

It is also interesting in identifying different types of technologies that exist in fintech. This financial technology does not stand alone, as it requires other advanced technologies to support its operations.

Artificial Intelligence (AI) and Machine Learning (ML)

Both of these technologies are commonplace in fintech and play a huge role in the growth of financial industry. Several fintech applications that rely on AI and ML are credit card balance calculation, fraud detector, and financial or property management.

Big Data and Data Analytics

A fintech application collects an innumerable amount of data, either from the number of consumers or producers. Big data and data analytics technologies greatly assist fintech in recording the consumers’ preferences, shopping tendencies, and investment activities.

This data collection is extremely useful in developing predictive analysis. Later on, this predictive analysis will be used for predicting the consumers’ activities along with their routine. From here, fintech can create a marketing and algorithm strategy capable of detecting frauds.

Read also: What Is Big Data?

Robotic Process Automation (RPA)

RPA technology refers to a repetitive activity by robots to simplify jobs in the financial institutions. The result is that humans will no longer have to perform monotone tasks.

An example of the implementation of RPA in fintech technology is data and statistics collection, regulation management, marketing and communication activities through e-mail and chatbot, and transactions management.

Blockchain

This technology is used en masse in the financial industry due to its capability of recording financial transactions safely. Every transaction is encrypted so that the probabilities of cyber-attacks can be decreased significantly by using this technology. Apart from the definition of financial technology, companies or start-ups that would like to build their own fintech services must know the necessary kinds of technologies so that they are able to build reliable financial software or application. Of course, it will not be easy in managing fintech companies, which is why Advance Innovations is present in the form of CONFINS service that is ready to help your business. Contact us immediately to use this service!