How the Journey Starts

How is a fintech is created? Entrepreneurs see aspects of traditional financial services either being delivered inefficiently (with too many unnecessary steps and bureaucratic requirements) or leaving too many potential customers out of the market. Fintech entrepreneurs, by applying creativity, technology, partnerships and understanding of the regulations, started creating cheaper solutions (such as a free bank account or lower interest on loans), or with better service and less bureaucracy (hassle-free account opening, in-app real time customer interface) or delivering better value (active investment management). As with all innovations, some will grow, some will remain as niche solutions and others will disappear or be incorporated. Many new digital banks started as digital wallets with a physical card and cheap payment fees.

Fortunately, many of these ideas coincided with a time (roughly from 2012 to 2020) when capital markets had many investors willing to bet on new solutions and propositions, which has contributed to the rapid creation of many start-ups across the globe.

What are Start Ups?

Start Ups are new companies with a focus on innovation, trying to find new ways of delivering services, products and processes using technology and innovation. They are mostly in the initial stages of business, have not generated profits (or meaningful profits, at least), but do have short term growth potential (the "Up" part) with proper investment, and the proper leverage.

Fintech are a subset of start-ups, but a start-up can be any company from any industry or segment that is in the stage and condition defined above. It is not a segment of business but defines the stage a company is and is always linked to starting technology and innovation driven companies.

Fintechs are changing the Financial Service environment

One side-effect of the emergence of fintechs is that many incumbent banks are facing the heat of new competitors, but are also learning from them, creating a rich environment for innovation. As the number and quality of competing solutions grow, the new technologies are changing our relationship with financial institutions and money itself. Fintechs are also creating new processes and ways to deal with background issues in a faster, cheaper and more comprehensive way due to the advances of technology.