BBVA API Market
Fintechs are financial platforms that democratize finance, as well as the ecosystem, technology and companies on which they rely
Fintechs are the next iteration of the financial world. What are these financial platforms and what types are there? In Spain, fintech companies are creating a mature and growing market thanks to the inherent advantages of these products and services. What barriers are holding back their innovation? What challenges are being solved?
Fintech is a term that “refers to all activities that involve the use of innovation and technological developments for the design, offering and provision of financial products and services,” according to the National Securities and Markets Commission.
The concept of fintech refers both to the sector of technological-financial development and to the specific technology that occurs there, as well as the companies present in this ecosystem or its products. There is a fintech sector, fintech development, fintech companies and fintech products.
The term “fintech” comes from merging the words finance and technology.
Like any other sector, fintech also includes different types of use, each of them called “verticals”. The most common types are:
These types of financial platforms seek to offer advice to manage the capital of clients, or directly manage this capital autonomously under certain guidelines established by the client. For example, the level of risk in investments.
They usually use of algorithms of various types such as expert systems, artificial intelligence and machine learning, and are very automated. Some are used as an order prescription mechanism and others as market prospecting.
Wealth management financial platforms also include social trading, an environment in which investors and traders are in contact with each other. These types of platforms “learn” thanks to the integration of hundreds or thousands of professionals.
Personal finance is one of the most prevalent B2C solutions. It consists of platforms that allow users or consumers to be able to personally carry out effective management of their finances, and to buy certain financial products that, in the past, were only within reach of a few investors.
They are usually quite customizable and offer custom solutions depending on the investor’s level. After all, not all financial products are for all people. In many cases it is possible to distinguish by sectors, risk levels or region.
The first financing fintech platforms were crowdfunding systems, where several people can finance a product or service in its design phase. Instead of resorting to classic financing, startups can have loans (crowdlending) or financial instruments (crowdequity). Alternative financing emerged in parallel to social networks, and replicated the leap from Web 1.0 to Web 2.0 within the fintech ecosystem.
The most widely used fintech applications are probably apps for payment between mobile devices or between companies. Security tools and regulatory shielding have helped extend these payment methods both to the general public and within the business world.
Generally B2B, big data platforms are entities that generate added value by analyzing a large volume of data, which they transform into useful information and knowledge. Artificial intelligence is often used for this analysis, in order to obtain latent spaces of high information density.
For obvious reasons, the security of fintech platforms requires several layers of online customer identification. These are assistance tools, such as HR in a company, without which it is not possible to make safe use of fintech.
Many fintech companies are entirely dedicated to API development, systems that allow different systems or apps to communicate with each other. These APIs are not visible to the user, but they support a good portion of the interactions between users and the fintech universe. Of course, these guys are not closed off or isolated from each other.
Fintech is a new ecosystem of products and services that has both advantages or strengths and disadvantages or challenges. Obviously, the benefits outweigh the obstacles.
Most of the advantages of fintech feed back to each other in various virtuous circles. For example, lower operating costs increase the possibility of scaling, which attracts new players that generate more accessible products with which more knowledge and market is generated.
|Lower costs per operation||Decrease in costs due to scale or volume issues||Higher profit margins for startups|
|More accessibility||More affordable and easy to use||The banked population and the potential market increase|
|Knowledge generation||Collect a lot of data||Processed, this data results in useful information to fintechs|
|Possibility of scaling||The marginal cost is almost zero||Multiplying users several times is affordable|
|Growing ecosystem||There is more and more training and players||New products and services emerge from the interaction|
At the opposite end, fintechs also face a significant number of challenges. Some will be solved over time, such as the generational digital divide, while others require active involvement, like regulations.
|Digital barriers||Not all end users are digital||Market cap on digital and connected users|
|Lack of regulation||Since this is a new sector, it still needs laws||Quite a few users distrust deregulation|
|Non-universal accessibility||Sometimes it is not possible to talk to a human being||People with disabilities may not have support|
|Ignorance||They are not well-known tools||Users do not reach them because they are outside the reality in which they live|
As the “Map of fintech innovation in Spain” shows, the sector is positioning itself as a mature environment in which to invest. Within the country, Madrid and Barcelona are two major poles of dynamization, followed by Valencia, Malaga and Zaragoza, as well as regions such as the Basque Country, Galicia and the Canary Islands.
Finnovating has published one of the most relevant rankings in the sector for years. The annual ranking shows the most relevant fintechs by sector, a complete list with hundreds of names. Due to the sector’s dynamism, it is common to see different rankings in consecutive years. You can also see the growth of fintechs in Spain.
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