Financial technology, also known as fintech, is transforming the global financial landscape. What began as a niche sector of startups disrupting legacy institutions has rapidly evolved into a multi-trillion-dollar ecosystem — one that’s reshaping financial activities for consumers and businesses alike.
This article explores what fintech is, how it works, and the major ways it’s shaping modern finance.
What is fintech?
Fintech is an industry consisting of companies (i.e., “fintechs”) that leverage technology to deliver financial services such as payments, lending, investing, and insurance. Many fintechs aim to beat the speed, accessibility, or user experience associated with traditional financial institutions. Some also focus on meeting the needs of unaddressed or underserved populations.
Fintechs come in all shapes and sizes. They can be startups, banks, nonbank financial institutions, and even cross-sector firms (i.e., tech companies entering finance). Many fintechs are popular or successful enough to have become household names. These include:
Peer-to-peer payment services like Venmo and PayPal
Retail trading platforms like Robinhood and Coinbase
Neobrokers like Trade Republic and Scalable Capital
Neobanks like Revolut and N26
Some of these fintechs defy easy categorization and may offer multiple products or services across the categories listed above.
How fintech has shaped our modern world
Fintech companies have had a major impact on how customers save, borrow, invest, and manage their money.
For businesses, fintechs can help improve the customer experience while unlocking better decision-making capabilities and more agile operations.
For consumers, fintechs have improved efficiency, convenience, and accessibility in managing financial tasks — especially in areas where traditional banking is limited.
The industry has also reduced geographic and economic barriers for certain populations, particularly through leveraging mobile technology.
While some fintechs aim to replace traditional banks, others prefer to partner with them to enhance service and improve access. This evolving partnership has led to new business models like Banking-as-a-Service (BaaS), in which traditional banks provide back-end infrastructure for fintechs.
5 key areas of the fintech industry
As an industry, fintech encompasses all sorts of companies and services. Here, we’ll break down the five general areas to which most companies belong.
Digital banking
Digital banking reduces or eliminates the need for physical bank branches and enables customers to manage their finances entirely online.
Customers can perform a wide range of banking activities through mobile apps or web platforms, including verifying their identity, transferring funds, paying bills, applying for loans, and even depositing checks. (Note: Digital identity verification must comply with KYC and AML regulations, which vary by jurisdiction.)
This type of 24/7 access is fast becoming standard among digital banks, offering greater convenience and reducing reliance on in-person services and physical paperwork. Many established banks have evolved to offer digital banking, but there are plenty of digital-native neobanks popping up with promises of lower fees and improved access.
Peer-to-peer lending and credit
Peer-to-peer (P2P) lending connects borrowers directly with individual lenders through online platforms, largely bypassing traditional banks and financial institutions.
These platforms act as intermediaries, matching prospective borrowers with retail or institutional investors looking for an alternative means of earning interest. Some P2P platforms incorporate alternative data into credit assessments — such as educational background or digital financial behavior — though the use of such data is subject to consumer protection, privacy, and other regulations.
P2P models may result in more competitive interest rates and flexible loan terms for borrowers, especially those who may not qualify for traditional credit. But this isn’t always the case, and customers should still read the fine print and compare costs to understand whether P2P options are better than those they can find elsewhere.
While most P2P loans are unsecured, the model allows for diversification across multiple borrowers, which may help to mitigate (though not eliminate) the risk for lenders.
Examples of P2P lending platforms include Funding Circle and Mintos.
Digital payments solutions
A digital payment, sometimes called an electronic payment, is the transfer of funds from one account to another using a digital device or channel.
Digital payment systems now encompass a wide range of technologies, including mobile wallets (such as Apple Pay and Google Pay), contactless card payments, and real-time bank transfers. These allow users to pay online, at point-of-sale terminals, or even directly via a smartphone.
Digital payments are widely used by both consumers and businesses. Transactions are processed and recorded in real time or with a short settlement window, reducing the need for cash or standard bank transfers.
Many banks have their own digital payment solutions, while third-party platforms like PayPal or Venmo remain some of the most widely used alternatives.
Robo-advisors and digital wealth management
Robo-advisors are algorithm-driven platforms that provide automated investment services with minimal or reduced human intervention. By collecting information about a user’s profile, financial goals, and risk tolerance, they can generate personalized portfolios and manage investments automatically.
Because they cut down on the costs of human management, robo-advisors typically offer lower advisory fees than traditional advisors. This makes them especially attractive to younger investors and others who may have previously been underserved by traditional financial institutions.
But it’s worth noting that digital wealth management goes beyond robo-advisors. Indeed, technology is rapidly being integrated into the broader services offered by financial advisors. These digital tools can enhance insights and improve transparency across devices and platforms.
Blockchain and cryptocurrency
Blockchain is the foundational technology behind cryptocurrencies like Bitcoin and platforms like Ethereum, functioning as a decentralized digital ledger. It records and verifies transactions without the need for a central authority, such as a bank, by using a consensus mechanism across a distributed network.
Advocates claim that this decentralized structure enhances data integrity and security. Others, however, note that blockchain systems still face technical and economic vulnerabilities, including the potential for majority attacks and smart contract bugs.
Beyond cryptocurrencies, blockchain's potential is being explored in a wide range of industries, from supply-chain management to identity verification. Technologies such as zero-knowledge proofs and distributed data storage further expand its applications, suggesting that blockchain could significantly reshape not only financial systems but also how information is stored and shared across sectors.
The fintech landscape
Major players and fintech startups
Two of the most influential players shaping fintech today are Visa and Mastercard, payment networks whose infrastructure supports trillions in digital transactions annually. Together, they lead the global card payments market and are increasingly investing in new initiatives, such as real-time payments and open banking.
In Asia, a major player is Ant Group (formerly Ant Financial), an affiliate of Alibaba and operator of Alipay — one of the world’s largest mobile payment platforms. Ant Group specializes in digital wallets, lending, wealth management, and other fintech services.
In Latin America, Nubank is a popular no-fee, digital-first consumer neobank.
In Europe, neobanks like Revolut and N26 offer banking services including checking and savings accounts, debit cards, credit cards, and more.
On the infrastructure side, companies like Stripe and Adyen contribute payment processing capabilities to both startups and global brands, enabling more seamless transactions across digital platforms.
Fintech solutions for consumers
It’s not a stretch to say that fintech innovations have significantly changed how consumers manage their personal finances. Neobanks have reduced many of the barriers associated with traditional banking by offering lower-cost accounts, simplified onboarding, and intuitive money-management tools within their mobile apps.
In addition to neobanks, personal financial management (PFM) apps like Credit Karma (credit monitoring), Rocket Money (subscription and budget tracking), and YNAB (detailed budgeting) help users take greater control of their finances. These platforms often aggregate data from multiple financial accounts — typically with the user’s explicit permission — into a single interface, helping users track spending, set budgets, and forecast cash flow.
Together, these tools may support greater financial literacy and even confidence, particularly among younger and digitally native consumers.
Fintech solutions for businesses
B2B fintechs help businesses automate and optimize a range of financial workflows, including managing payments, enhancing cash flow visibility, and improving access to capital.
For example, in corporate finance and treasury management, solutions like Kyriba and Tesorio help companies forecast cash, manage liquidity, and optimize working capital. These platforms integrate with ERP systems to give finance teams real-time (or near-real-time) insight into cash positions and automate workflows such as accounts receivable and supplier payments.
And platforms like Brex and Ramp help companies manage spending and access short-term purchasing power through corporate cards, credit assessment tools, and automated expense workflows tailored to fast-growing startups.
The impact of fintech on traditional finance
Legacy institutions have recently been forced to contend with fintech in a big way. According to Statista, the number of fintech users globally is projected to exceed 5.5 billion by 2027. Their adaption is especially noticeable in the European and Asia-Pacific markets.
In order to retain their market share, traditional financial institutions have needed to kickstart their own digital innovations, work together with fintech companies, or both.
Disruption vs. collaboration
While fintech once posed a disruptive threat to traditional banks, the narrative has evolved toward collaboration. In fact, many financial institutions are partnering with fintech startups rather than competing directly, recognizing the mutual benefits.
These collaborations promise banks the ability to quickly integrate cutting-edge technology, while fintechs gain access to capital, regulatory expertise, and customer trust. Notable examples include JPMorgan Chase investing in digital-payments startups and Goldman Sachs teaming up with Apple to launch the Apple Card. Meanwhile, some banks have acquired fintech firms outright to accelerate innovation and close the tech gap internally.
This shift from disruption to partnership reflects a growing understanding that the future of finance may lie in a hybrid model, where the speed and innovation of fintech combine with the scale and trust of traditional banking. By combining forces, both entities may be able to respond more effectively to evolving customer needs, regulatory pressures, and technological advancements.
The role of cybersecurity in fintech
Cybersecurity in financial services is governed by a combination of legal, regulatory, and industry standards. Depending on their activities and the jurisdictions in which they do business, fintechs may be subject to strict requirements that mandate risk-based security policies, data protection measures, and incident response procedures.
Because they're already subject to strict regulatory scrutiny, the banks that partner with fintechs may help them develop cybersecurity standards that ensure compliance across all facets of the partnership. (This is another potential benefit of collaboration, in certain cases.) Even so, fintechs ultimately remain responsible for meeting any regulatory and/or security requirements that apply.
Fintechs can also lead the way in enhancing security and compliance for banks in the digital age. For example, Fourthline offers digital identity verification and anti-money laundering (AM) solutions designed to comply with regulatory requirements across European markets.
To learn more about Fourthline’s security and compliance solutions for fintechs, speak to one of our experts today.
This article is for informational purposes only and does not constitute legal advice. Because regulations change frequently, always consult with legal and compliance professionals regarding your (or your business’s) specific circumstances.
