L1

= Financial Technology

It refers to the use of technology to improve, innovate and automate financial services

E.g Online Banking, Mobile Payments and many more

In short: FinTech combines Finance and Technology to make financial services faster, cheaper and more accessible

Fintech challenges traditional banks and insurance companies by offering services that are:

• more efficient (automated, faster processing)

• More customer-focused (better UX, digital first)

• More inclusive (people without access to traditional banking can now use digital finance)

1. Technological Innovation

> Smartphones, Cloud Computing, AI, Big Data, blockchain enable new financial solutions

1. Regulatory changes

> Open banking and PSD2 in the EU forced traditional banks to share data securely with third parties.

1. Customer behaviour

> people are now comfortable with digital tool and expect instant, mobile-based services

1. Globalisation and competition

> new start-ups enter the market with lower costs and global reach

Startups - developing innovative financial solutions (e.g. Revolution, N26)

Incumbent institutions - traditional banks adapting or partnering with FinTechs

Technology providers - cloud, data analytics, AI tools, Cybersecurity firms

Regulators - setting legal frameworks for innovation and consumer protection

Investors - venture capital and private equity funding FinTech growth

Payments (PayPal, Apple Pay)

Lending (Funding Circle)

Wealth Tech (Robo advisors such as Betterment)

InsurTech (Digital Insurance like Lemonade)

Reg tech (technology to help companies comply with regulations)

Blockchain/Crypto (smart contracts, digital currencies)

Fintech has…

1. Increased competition in the market - banks need to innovate to survive

1. Improved access to finance - especially for small businesses and under banked populations

1. Created new risks - data privacy, cybersecurity and regulation challenges

The next phase is likely to include…

• more AI integration

• Collaboration between FinTechs and Banks (not just competition)

• Growth in sustainable finance and ESG based innovations

• Expansion in emerging markets (Africa, Asia, Latin America)

• Payments were slow and often limited to banking hours

• International transfers were expensive

• Cash dominated daily life

No with Fintech:

• Real-time payments (instant transfers)

• Cross-border payments with lower fees

• Integration with online services (Uber, Amazon…)

• APIs (Application Programming Interfaces)

• Tokenisation & Encryption (secure data during transaction)

• NFC - Near Field Communication (contactless payments with phones or cards)

• Blockchain (peer-to-peer payments)

Neobanks (also called digital banks) are banks that operate entirely online - no physical branches

They offer a full range of services: current accounts, savings, cards, and loans - all via app

Examples:

• Monzo (UK)

• N26 (Germany)

• Revolut (UK)

Key features:

• Easy and fast Account opening

• lower fees

• Intuitive apps with budgeting tools

• Often target young customers

Key features:

• Easy and fast Account opening

• lower fees

• Intuitive apps with budgeting tools

• Often target young customers

How they make money:

• Interchange fees from card payments

• Premium accounts with subscription fees

• Loans, overdrafts and investments

• Partnerships with other financial providers

Profitability (many still operate at a loss)

Customer trust and data security

Compliance with banking regulations

Strong competition from traditional banks going digital

• Convenience - 24/7 access and instant transfers

• Financial inclusion - people without physical banks can access financial services

• Cost efficiency - lower transaction and maintenance costs

• Transparency- real-time spending tracking

• Innovation - integration with AI, crypto, or personalised finance

Fintech would not exist without it!

Every transaction, customer behaviour, financial interaction creates digital traces

Fintechs use these data insights to make faster, smarter and more personalised financial decisions

1. Big Data - FinTechs analyse them to identify patterns

2. AI and Machine Learning - used for automation, prediction, personalisation

3. Blockchain Technology - records transactions

4. Cloud Computing - enabled real-time data access

5. APIs - let different financial systems communicate securely (e.g open banking)

• Efficiency - automation reduces manual work and costs

• Accuracy - data-based decisions reduce human error

• Speed - instant risk assessment and faster approvals

• Inclusion - data allows serving customers without traditional credit history

• Data Privacy & Security - storing and analysing large amounts of personal data creates huge cybersecurity risks

• Bias in Algorithms - AI models can produce unfair outcomes if trained on biased data

• Regulation - FinTechs must comply with GDPR, PS2D, and other data protection frameworks

• Over-reliance on automation - can reduce transparency or human judgement

Revolut

Klarna

Plaid