What is fintech?

Fintech is a concept that has its origins in the financial sector, where it primarily referred to the technological facility of an institution. With time, it took on another meaning. For a few years now, the term fintech has been used in the context of innovative startups and modern financial services.

Transformation of the financial sector

Smartphones have shaken the market of gaming consoles, MP3 players, cameras, video cameras, notebooks, GPS navigation and many other devices, with a direct effect on a plethora of industries. The truth is that the Internet and mobile devices have revolutionized most aspects of everyday life. The time has now come for new technologies to shake up the banking system, introducing Innovations in the way we perform transactions, and handle and book payments.

Most services which have once been the domain of banks can now be used with a simple reach to one’s pocket - without a visit to a physical branch and a conversation with a consultant from behind a glass window.  Apple once led a campaign with the main slogan being “There’s an app for that!”. This slogan reflects the current state of fintech in its entirety.

What does this revolution bring?

New technologies are not just apps; it is machine learning, artificial intelligence, behavioral analytics and precise marketing, and all this based upon concrete data delivered by the users themselves. Fintech startups engage their clients, learning their behaviors and providing solutions from which they really want to benefit.

In the recent years, fintech has been growing at a dizzy tempo, driven by, among other things, blockchain, peer-to-peer models and crowdfunding. Developed by small startups, these ventures may even threaten big institutions. Investors constantly look out for occasions to finance promising ideas which will interrupt the bank monopoly.

Financing enterprises and consumer loans is one the financial branches to which few have had access so far, besides banks, that it. Today there are not only many more ways to raise funds but also to invest in granting loans to others. Loans in a peer-to-peer model on platforms such as Upstart or LendingClub not only help the borrowers to save, offering lower margins than banks, but also open up new possibilities to investors.

Kickstarter and Indiegogo make crowdfunding gain in popularity. This form of financing allows for the creation of various projects, supported by a large number of smaller deposits made by the public concerned. This causes a rise in many companies and products, which simply couldn’t count on sufficient funds with classical forms of financing.

Apart from changes in the way of raising funds, the greatest change takes place in methods of their transfer. Today, transactions outside the traditional cash circulation can be made in many various ways. In traditional trade, fintech provides solutions for fast and cheap handling of payments by card, such as online and offline. Apple Pay and Google Pay make cards redundant for contactless payment - we can use a smartphone or smartwatch for that.

Virtual wallets such as TransferWise allow to perform quick and cheap money transfers, acquiring gigantic clients such as Western Union. The number of intermediaries which get their hands on our funds is limited to a minimum.

The fintech branch is aiming to decrease margins ran by big institutions, excluding intermediaries from the game; instead, it invites a public focused around their products. An example of such a practice may be eToro - an investment platform that allows to trace the precise steps of other investors, and even copy them automatically.

Fintech’s success - how so?

Banks are not famous for their transparency, nor for being customer-friendly. On the other hand, most fintech apps offer simple, transparent solutions, that beat the outmoded apps of traditional banks hands down. Providing solutions that break off with outdated bank practices is a specialization of fintech startups.

Concentrated on clients, fintech solutions allow to use its services in a simple manner. We can do all this with one device. Back in the days, we would have to leave home and visit a given company’s branch; today, we do it without leaving home, using a dedicated app.

Fintech is not just innovative in the technological sphere. Subsequent startups are creating products on the market like never before, using financial models that no one has ever come up with. That is why there are situations, in which entrepreneurs enforce a change in past legal regulations that are now obsolete and unsuited to the present reality.

Examples of the most popular solutions of Fintech products

Lending Club

A startup from San Francisco was the first to offer loans in a peer-to-peer model. Currently the biggest fintech startup of this kind on the market, responsible for loans with a total of 38 billion dollars for over 2.5 million clients. Before becoming a fully-fledged platform, Lending Club functioned as one of the first apps on Facebook. This changed with the first big financing round for over 10 million dollars in 2007.

For years, Lending Club has been one of the hottest startups for American investors. Until its debut on the stock exchange in 2014, it secured enormous amounts for further development in numerous financing rounds. The company’s first public offer brought a valuation on a very high level -

8.5 billion dollars. Lending Club is currently offering more and more financial services than at first, leveling part of the firm’s offer with classical banks.

The core business of Lendingclub.com is loans ranging from 1000 to 40 000 dollars, usually requested for a period of 3 years. The firm reviews creditworthiness, based on which it determines the accurate loan rate and any fees related. Loans are finances by investors, who may list all applications on the site - the minimum investment amount is 25 dollars.

Interests for borrowers usually range from 6% to 26% depending on the creditworthiness review, with an average return to investors from 5.47% to 10.22%. Lending Club offers much better terms compared to traditional banks.


Another Startup from the Silicon Valley. Its founders, Tim Chen and Jacob Gibson, have made their goal to improve the status of personal finances of all those concerned. Their website provides information about financial institutions, educating consumers and helping them to choose the right credit cards, loans or credits. The main advantage of NerdWallet is wide summaries and comparisons of various offers available on the market.

Using apps for mobile devices and webpages requires nothing more but registration in the portal. The company does not charge its clients, earning on recommending services to banks thanks to affiliation and partnership programs. Considering that the initial capital of the startup was barely 800 dollars, and that it is now valued at 500 million dollars, it is easy to trust its financial recommendations. Founders of nerwaller.com have succeeded in creating a company bringing them millions in profit and employing more than 200 persons, providing their services for free.


The Robinhood from California doesn’t rob anyone, but he gives a chance to earn to all those interested. The startup aims to make it possible to invest in listed companies excluding commission, in a transparent and accessible way. Robinhood himself earns on the balances of his clients, margins from credits and special Gold accounts. Beginning 2018, the service has been used by over 3 million users, with their average age being up to 26 years. The company has managed to draw young investors, who in most cases are not interested in the stock exchange.

Square, Inc.

Startup specializing in payments, both software wise and in terms of physical terminals, established in 2009 in San Francisco by Jack Dorsey and Jim McKelvey. Their app dedicated for Apple and Google platforms allows to receive payments by card using a tablet or smartphone. Data from the card can be entered manually, using Square Reader - a card reader connected to a Jack contained in the device, or via Bluetooth LE thanks to Square Chip.

In 2013, the company introduced Square Stand, a way to change an iPad into a simple POS point. In 2017, another new product sees the light of day; Square Register - a cash register system for small and medium enterprises. The crowning of works on these types of solutions is Square Points of Sale, a combination of a cash register, payment card terminal and stock management system with integration of external systems: Shopventory, Weebly or Bigcommerce.
Apart from solutions for enterprises, the firm offers its Cash App for sending money orders between its users as well as physical virtual gift cards.

The company’s product portfolio features Square Capital, which are loans for traders using Square solutions. Another branch of the business, drawing away from fintech, is Caviar taken over in 2014 - an app for ordering food. In 2018, the company took over another “gastronomic” startup in San Francisko called Zesty - a catering platform targeted at business. Square also offers its own CRM Customer Engagement system and the Square Payroll program for managing payrolls - both released in 2015. Square Appointments. This is not a full list of solutions offered by Square, however their greater part is not connected to fintech as such.


Stripe has made its purpose to make Internet payments not just as simple as possible, but also safe to the maximum. The startup founders, brothers John and Patrick Collision from Ireland, took a short time to secure quite the funds from a few rounds of financing at their starting point in 2010. The last round brought 150 million dollars and took place in 2016. At present, the company is valued at 9 billion dollars.

Stripe shares API, which can be integrated with the existing apps and websites for processing Internet payments. In 2018, the company shared tools for fighting fraud, which work parallelly with their interfaces and help to block unfair transactions.
The company expanded its offer with clearing products working as part of the Stripe platform, giving enterprises the possibility to manage repetitive transactions (e.g., as a subscription) and invoicing. Stripe’s strive to make the business simple is also achieved via the Atlas portal, launched in 2016. Using this platform, entrepreneurs may easily begin their business activity registered in Delaware in the US.


Another startup with quick and simple payment integration using an original API. WePay handles: crowdfunding websites, stock exchanges and small-sized companies. Rich Aberman and Bill Cleriso founded the company in 2008. A stimulus for its creation were difficulties with collecting money from the members of the bachelor party organized for Aberan’s brother. To do this, he used mainly PayPal, deeming the whole process as cumbersome.

Their solutions quickly appealed to investors, which included Max Lavchin, cofounder of PayPal. As it developed, the founders had trouble with maintaining the right growth pace in peer-to-peer transactions, with time focusing to a greater extent on processing payments. Taking on a new direction has led the company to a path of further success and in 2016, the enterprise itself noted a 1500% growth in comparison with the previous year. As of 2017, the company is valued at 220 billion dollars.

What is the future of fintech?

Those interested in the field may see a breakthrough in automation. Machine learning brings us closer to decisions and actions taken by machines. This is not just a facilitation in the case of repetitive transactions and tasks, but also investments based on data analysis.

The increasing attention of large financial institutions is targeted at their competition created by fintech startups. The biggest fish in the sea, instead of making way, decide on introducing smaller companies in their ranks. This was exactly the motivation behind the purchase of WePay by JP Morgan Chase, one of the greatest financial holdings in the world.

Another step awaiting the fintech branch is unification of systems and free sharing of information. Solvency and transactional history are precious data, thanks to which higher loans may be granted faster, and credibility of business partners verified in just a few clicks.