Fintech brings numerous opportunities to change how customers access financial services and products . Because of the nature of the services provided, it is very important to look into the identity, privacy and security of the Services. It is inevitable since fintech firms obtain customer’s private data and also generate significant financial information which can be used for analytics. The challenge facing most fintech companies just like the other financial institution is how to keep the customer’s data secure.
How can fintech firms ensure they comply with data protection laws and also protect the data of their clients to maintain customer confidence? One, they should be careful about using public cloud systems. They are highly susceptible to hacking and court orders. Another crucial action is to have and implement data protection policy and measures.
Money and payments
Fintech is changing how people use money and how they make payments. Payments especially has been an area where fintech has made great strides. While people still prefer using cash and credit cards for payments, it seems that the future is in mobile payments. Companies have seen this and currently various apps assist in contactless payments. This includes Apple Pay and Android Pay. Contactless payment is more secure than contact payment as the magnetic stripe used on the card is very vulnerable to hacking.
Use of money is also quickly changing with fintech. An example being Bitcoin, which is slowly beginning to be accepted as a store of value and a mode of payment by numerous vendors around the world. Central banks issue traditional currencies while crypto-currencies are not issued at all. In fact, there are a definite amount of Bitcoins in circulation. What changes is the value of a unit in relation to brick and mortar currency itself. The technology behind Bitcoin is known as block-chain. The efficiency and effectiveness of this technology has been praised by many and has been recommended in various other areas such as registration of titles.
Markets and Marketplaces
Fintech is revolutionising how markets and marketplaces work through crowd funding and peer to peer lending (P2P). Crowdfunding is raising money from a ‘crowd’. Typically, the amounts are usually small, but when aggregated they become massive amounts. The internet is enabling the ‘crowd’ or rather different persons from all over the world to come together to fund start-ups. The antithesis of this is where a huge corporation such as a bank invests in a project and calls all the shots. Simply put, crowdfunding simplifies what a bank does, that is serving as a financial intermediary. Intermediation is how savers save their money in banks and banks in turn lend it out at a profit to borrowers. Crowdfunding eliminates costs associated with this function.
P2P (peer to peer) lending is matching borrowers to lenders of money through online platforms. The advantages for borrowers is that they can obtain money that they could have probably not received via the brick and mortar banking system. The advantage for lenders is that the money can generate interest which could be higher than the amount that banks give for savings.