Fintech is the shortened version of financial technology. It describes technology businesses that compete with more traditional financial organisations, such as banks.
The term was often used to describe the operating systems behind financial institutions such as banks or building societies. Now, it's starting to represent companies that are disrupting traditional financial services. This includes mobile payments, transfers, loans, fundraising and investing.
Monzo: This is one of the best known digital-only banks in the UK. Digital-only means it doesn't have a high street presence. It won customers’ attention because it gave real-time updates when they spent money. And the bright pink card helped too.
Kickstarter: This website helps entrepreneurs turn their business ideas into reality by crowdfunding. People can donate towards a new business idea or project. Their donation entitles them to follow the process of bringing the business to life.
Bitcoin: This is a form of cryptocurrency launched in 2009. It's different to money issued by a country's government because an independent authority issues it. There are no physical bitcoins, and it's not legal tender. But it has triggered the launch of other virtual currencies.
Nutmeg: This is an online investment management company. It's designed to make investing easy, without any technical jargon. Users can invest whether they have £500 or £5million.
Zopa: Launched in 2005, this was the first peer-to-peer lending company. These platforms let individuals loan each other money without a bank. Regulated by the Financial Conduct Authority, Prudential Regulation Authority (PRA), and the Peer-to-Peer Finance Association, Zopa launched a bank in December 2018.
The financial crash of 2008 changed the way a lot of us felt about money. Consumer money was lost, and banks have spent years trying to rebuild trust. It's a perfect climate for new, smaller financial companies to offer something different.
Open Banking has helped to grow the fintech industry too. In 2016, the Competition and Markets Authority (CMA) released a report on the UK banking sector. With Open Banking, new providers like Revolut and Starling can compete with banks to offer financial services.
These providers offer products like traditional banks, but they don't have physical branches. With fewer staff members, overheads and old systems, they can roll out new services faster.
The FCA regulates all fintech banks with a current account. They will also be part of the Financial Service Compensation Scheme (FSCS), which protects your money up to £85,000 if the firm goes bust.
Fintech companies want to make managing your money easier and faster. This means their services will often be more accessible compared to older institutions. Technology will continue to improve, and financial companies will want to adapt, with fintech providers likely leading the way.
Many of us use services from fintech companies every day without even thinking about it. For example, you can pick a new savings account, buy a plane ticket or even invest - all through your phone.
The growth of fintech should make for a more competitive industry. This should lead to better rates and services for your money and better ways of making it work for you.
A unicorn isn't just a mythical creature. In the financial world, a unicorn is a privately held start-up valued at more than $1 billion. The term was coined in 2013 - it represents how rare it is to have such a successful business.
New bank accounts are offered all the time, so compare all of the best options to make sure you get the right one for you.