What Is Fintech?

What Is Fintech?

Technology is the key component that differentiates fintech companies from traditional financial services organizations. Brick-and-mortar banks often offer apps and online accounts, but a fintech bank might launch an app and never open a physical branch. It's a technology company—an app—that's part of the financial services industry.

Examples of Fintech Companies

Fintech isn't limited to one part of the financial world. There are companies that focus on banking, lending, investing, insurance, payments, transfers, regulatory compliance and fraud. But here are seven examples of consumer-focused fintechs:

• Neobanks: Online-only banks that offer checking accounts, savings accounts and other types of basic banking services. Many neobanks aren't technically banks: They're technology companies that create easy-to-use apps or websites and then partner with a bank to store customers' money.
• Robo-advisors: Investment management services that use automation to help consumers choose and manage their investment and retirement portfolios.
• Online lenders: Offer online loans and lines of credit that might have lower interest rates and fees than loans from traditional lenders. Some fintechs also use technology to approve borrowers who struggle to get loans, such as subprime borrowers and borrowers who don't have a credit history.
• Embedded finance: Companies that put financial services into non-finance apps; for example, by allowing you to use buy now, pay later (BNPL) plans when making purchases online or letting you send money to a friend within a messaging app.
• Peer-to-peer (P2P) payment services: Let users send money to people or businesses using the balance in their account, a credit card, debit card or a linked bank account.
• Financial management apps: Budgeting and other financial management apps that you can use to get an overview of your finances and track your financial goals.
• Cryptocurrency apps: May include exchanges where you can purchase cryptocurrencies, wallets for storing crypto and other crypto-connected apps.

There are also many fintechs that offer products and services to other businesses instead of consumers. For example, a budgeting app might pay a data aggregator—another type of fintech—so its users can link their financial accounts and sync all their transactions in the budgeting app.

Learn more >> How to Link Your Bank Accounts

Fintech Trends for 2025

Some fintech companies improve existing products and services. Others disrupt existing markets by introducing new business models, such as peer-to-peer lending. In the coming year, we might see fintech continue to improve and disrupt finances in several ways.

Artificial Intelligence and Automation

Artificial intelligence (AI) is certainly the buzzword of the moment, but it also has many real applications within finance. Some companies now use AI chatbots to answer common customer service questions or explain the investing or tax implications of different actions.

Lenders are also using AI to automatically review credit applications and create credit scores that incorporate alternative data, such as banking data. As a result, you might get a decision faster and find it's easier to get approved for a loan even if you don't have a long (or any) credit history.

Learn more >> Should You Consult AI Tools for Investment Advice?

A Focus on Support and Partnerships

Traditional financial services companies don't want to get left behind as consumers shift to managing their money online. New fintechs might focus on helping these companies create digital experiences. In a sense, they're helping make traditional finance companies look and act more like fintechs.

Additionally, existing fintechs are looking for efficient ways to attract new customers. Some will explore partnering with financial companies to offer additional products or services. Others might try to partner with non-financial companies to get exposed to more people. For example, a payment app might try to partner with an ecommerce company to make its payment option available during checkout.

Age and Identity Verification May Become More Common

Companies often use fintech solutions to verify users' identities in different ways. For example, you might be asked to upload a picture of your government ID and then take a selfie. Or, the company might compare the information you share with data from your credit report.

You might notice an increase in age and identity verification requests as companies comply with new regulations and increasingly focus on fraud prevention.

Learn more >> Different Types of Identity Theft and Fraud

Benefits of Fintech

Fintech can offer consumers many benefits, including:

• Lower and fewer fees: Many fintechs avoid the costs that come with having physical spaces and pass on those savings to customers. For example, you might be able to get a bank account that doesn't charge monthly or overdraft fees. Or, you may get a loan with a low interest rate and no origination fee.
• Increased access to financial services: Some fintechs can increase financial inclusion by making it easier to open accounts, manage money and access credit.
• A potentially better experience: As technology-first offerings, fintech apps and websites might offer better interfaces and more convenient access to customers.

Challenges of Fintech

Consider some of the potential downsides of using fintech products and services:

• Limited access to in-person meetings: Fintech companies often don't have branches or offices where you can meet someone for a face-to-face conversation.
• Sparse product offerings: Many fintechs start by offering a single product, such as a personal loan or bank account. They might not be a good option if you want to have all your savings, investments, credit cards and loans at a single company.
• Potential security and privacy issues: The company might collect and sell your personal information, and your personal information could be exposed by a data breach.
• Unclear protections: The regulations and protections, such as Federal Deposit Insurance Corp. (FDIC) insurance, that apply to banks might not apply to fintechs in the same way. Keeping money at a fintech that partners with an FDIC-insured bank might not be as safe as having an account at an actual bank.

The Bottom Line

Fintech isn't for everyone, but if you're tech savvy and brave enough, you can use fintech to your financial advantage. From making investing easier to helping you budget your money, the growing fintech industry can make managing your finances more accessible—a bonus if staying on top of your money is at the top of your list of 2025 resolutions.