FinTech, or financial technology, is a term that it is difficult to avoid these days, as the sector continues to gather momentum across the globe. A recent ESET survey found that over two-thirds of businesses globally expect their investment in FinTech to increase post-COVID-19, while a study from Research and Markets found that the global FinTech market is expected to grow at a compound annual growth rate of 24% until 2025.
Investing in FinTech is an attractive proposition for businesses, as the technology provides a range of benefits, including reduced cost, ease of use and lower barriers to entry. However, amongst all the hype surrounding the sector, it can be hard to know exactly what FinTech is, and how businesses are actually using it.
That’s why in this blog, in order to shed some light on FinTech’s potential, we are taking a look at a selection of the various types of financial technology that are changing the way businesses operate, along with the ways that they are being used by companies around the world.
Online payment processors
ESET’s research found that the sector of FinTech that businesses are currently using more than any other is online payment processors, with 56% of companies employing this technology. Payment processors manage the credit or debit card transaction process, communicating customers’ card details to businesses’ banks.
Mastercard offers a business-to-business (B2B) payments solution in Asia Pacific called Mastercard Track™ Card to Account Transfer that allows businesses to use commercial cards to pay suppliers, even if they don’t accept card payments, by sending funds directly to their suppliers’ bank accounts. This helps address the challenge of card acceptance in the B2B space and improves cash flow to help modernize today’s B2B payments ecosystem.
Online cross-border payments
Similarly, cross-border payments are another type of technology that is extremely important for global e-commerce. It is increasingly common for the recipient and the payee of a transaction to be based in separate countries, so it is important that businesses are able to transfer money across different territories, and this is one of many areas where FinTech is making this process quicker and more secure.
Ant Group’s Trusple is a blockchain-powered global trade and financial services platform that makes it easier and cheaper for firms, especially small and mid-size enterprises, to sell their wares around the world while also reducing costs for financial institutions.
Trusple use smart contracts to handle trading orders between buyers and sellers on its platform. Using smart contracts means any updates related to orders, including order placements, logistics and tax refund options, as well as the processing of payments between buyers’ and sellers’ banks, becomes highly automated.
Online invoice financing
Almost half (44%) of companies across the world are currently using online invoicing, according to ESET’s research. This technology simplifies the invoicing process, allowing businesses to monitor cash flow more effectively.
Arex, which is currently launched in Finland, not only moves the traditional invoice financing model online, but uses an automated, algorithm-driven platform where businesses can advertise discounted prices for their outstanding invoices and investors can bid in real time.
InsurTech (Insurance Technology)
InsurTech is a rapidly expanding sector, and ESET’s research found that 33% of businesses currently use it, and 32% are considering using this technology in the future. By harnessing new types of data, such as those collected by smart devices, InsurTech allows companies to create ultra-customized insurance policies.
The CareVoice, a Shanghai-based InsurTech start-up, offers health and insurance benefits for start-ups in China by combining premium medical insurance with fully digital health and insurance services. The CareVoice allows a business start-up’s team to enjoy weekly sport competitions and get rewarded with vouchers to keep them healthier. When employees need medical help, they can talk to an AI voice-based virtual health assistant to find out whether they need a medical visit. If so, they can find relevant medical providers, and get physician appointments and e-reimbursement services – all via a mobile device.
RegTech (Regulatory Technology)
RegTech aims to solve companies’ regulatory challenges through automation, with disruptors in the sector using this technology to provide businesses with regulatory monitoring, reporting and compliance.
Countingup adds bookkeeping features to business bank accounts that can help automate tax filings for businesses. As the UK tax authority moves to mandate quarterly tax filings for businesses, what would otherwise become a major time sink can be more quickly solved with the help of automated RegTech solutions.
As the examples above illustrate, financial technology is being employed in a large variety of contexts around the world, and its role in global business is only going to continue to grow over the coming years. Consequently, it is more important than ever that these solutions are properly protected. For more information on how ESET can help businesses to use technology securely, head to eset.com.