What is a Fintech? What is Techfin?
Fintech refers to financial companies that use technology and innovation to reduce bureaucracy in various processes and increase their scope of operation. They aim to compete with traditional companies that deliver financial services.
Examples of these kinds of companies include Nubank (Brazil), Coinbase (USA), Wise (UK), Robinhood Markets (USA), and Ant Financial (China).
A fintech focuses on the digital environment, identifying specific needs and focusing on its customers. Their operations include:
- Financing
- Virtual currency
- Loans
- Insurance
- Payments
- Financial management
- Crowdfunding
- Exchange and reconciliation
- Investments
The partnership between fintechs and conventional banks adds security to their processes, attracting more and more audiences to their digital platforms, with reduced operating costs.
Techfin refers to a technology company that has launched a new way to provide financial services, one that is integrated into the company's own management system. They leverage their data expertise and their customer base to deliver better services than existing traditional service providers.
Examples of these companies include Google Pay (USA), Wechat Pay (China), Alipay (China), Facebook (USA), and Apple Pay (USA).
This solution is typically more advanced than current market options, built on a robust technology platform, and available to a large customer base.
Thus, they become competitors to banks and financial institutions. The banking processes are designed to be agile, economical, and secure, with a focus on data and the user experience.
The term “techfin” was coined by Chinese billionaire Jack Ma (co-founder and CEO of Alibaba Group), who is even cited as the creator of the first techfin of all, Ant Financial, in 2004.
Further differences
As we have seen fintech invests in enhancing the user experience in banking services, betting on technology as a solution, while techfins refers to a technology company that offers financial solutions for businesses that want to modernize their operations in the area.
It is possible to define this relationship with a phrase by Jack Ma himself:
"Fintech takes the original financial system and improves its technology, whereas TechFin seeks to rebuild the system with technology."
Techfins rely on data and structures developed by the core business of the technology company.
This can happen simply by improving the user experience of an existing service, making processes simpler, and with a user-friendly application.
However, techfin companies can go further, providing the entire financial service front end, creating a link between the intermediary (the financial institution) and the customer.
With these innovative services, techfins continue to collect large amounts of data for themselves but identify other crucial information about their customers, such as financial needs, payment behavior, and economic discipline.
Fintechs, in turn, focus on solutions to improve and enhance the experience of bank users and their services. Its work and innovation are applied in the development of technological tools for banks that provide ease of access, speed, and efficiency in the use or request of services provided by banks to their customers.
When you use your bank's application to access your banking data and services, you are using a tool developed by fintech.
Future expectations?
Fintechs and techfin companies proposed greater ease of access to financial services clients and democratization of access. With the Covid-19 pandemic, there was heightened anticipation for the next advancements in innovation and service offerings for fintechs and techfins. There have been though some negative opinions regarding their overrated innovation and overconfidence in their client services.
However, at this moment focusing on true innovation is required to remain relevant and competitive in the financial sector.
To remain in the spotlight, it is necessary to innovate.
In my next article, I had the pleasure to interview Tom Shnaider discussing how technology will continue to impact the financial market. Shnaider holds a Management and Business Analytics Master's degree at HEC Lausanne, and is a Crypto and Blockchain entrepreneur and co-founder of Apollo Consulting.
