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What exactly is fintech?

What exactly is fintech? Fintech refers to the integration of technology into offerings by financial services companies in order to improve their use and delivery to consumers. Moreover, it primarily works by unbundling offerings by such firms and creating new markets for them.

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A lot of companies you don’t think of as financial in nature really are fintech. Airbnb, for example: Sure, it’s a lodging marketplace, but its business is really about moving money from guest to host, often across borders. (People can also book stays in apartments that don’t exist for trips they don’t plan to take to transfer money… let’s save that for another post.)

A short decade after software started eating the world, everyone started talking about how every company can become a fintech company. What really classifies a company as a FinTech?

There are four core tenets: customer-facing product, transactional infrastructure, risk management and compliance, and customer servicing. And, in the case of lending there’s a fifth: companies also need to be able to manage capital. 

But really, not every company will become a FinTech, despite the VC hype. Non FinTechs that have successfully become FinTechs include Uber, Mastercard, PayPal, Apple, others. What do they have in common? They all started with a solution and a strong customer base and then shifted their business models to platform solutions. A platform allows other participants to either abstract solutions into their ecosystems or allow companies to white label products on top of their infrastructure; both with the goal of supercharging their customers’ experience.  

In conclusion, an inclusive and accessible financial products in addition to a new user experience = FinTech.

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What exactly is fintech?