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- What is Financial Technology (FinTech)? A Beginner’s Guide
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FinTech (financial technology) is a catch-all term referring to software, mobile applications, and other technologies created to improve and automate traditional forms of finance for businesses and consumers alike. FinTech can include everything from straightforward mobile payment apps to complex blockchain networks housing encrypted transactions.
In this guide, we’ll discuss the various types of fintech, the skills needed to work in the field, and the job outlook for several fintech careers. We’ll also take a closer look at a few effective ways to learn key industry skills, such as an immersive online fintech bootcamp — a great way for aspiring fintech professionals to get hands-on experience.
FinTech 101: Understanding the Basics
A Simple Definition of FinTech
The term “fintech company” describes any business that uses technology to modify, enhance, or automate financial services for businesses or consumers. Some examples include mobile banking, peer-to-peer payment services (e.g., Venmo, CashApp), automated portfolio managers (e.g., Wealthfront, Betterment), or trading platforms such as Robinhood. It can also apply to the development and trading of cryptocurrencies (e.g., Bitcoin, Dogecoin, Ether).
A Brief History of FinTech
While fintech seems like a recent series of technological breakthroughs, the basic concept has existed for some time. Early credit cards in the 1950s generally represent the first fintech products available to the public, in that they eliminated the need for consumers to carry physical currency in their day-to-day lives. From there, fintech evolved to include bank mainframes and online stock trading services. In 1998, PayPal was founded, representing one of the first fintech companies to operate primarily on the internet — a breakthrough that has been further revolutionized by mobile technology, social media, and data encryption. This fintech revolution has led to the mobile payment apps, blockchain networks, and social media-housed payment options we regularly use today.
How Does FinTech Work?
While fintech is a multifaceted concept, it’s possible to gain a strong understanding. FinTech simplifies financial transactions for consumers or businesses, making them more accessible and generally more affordable. It can also apply to companies and services utilizing AI, big data, and encrypted blockchain technology to facilitate highly secure transactions amongst an internal network.
Broadly speaking, fintech strives to streamline the transaction process, eliminating potentially unnecessary steps for all involved parties. For example, a mobile service like Venmo or CashApp allows you to pay other people at any time of day, sending funds directly to their desired bank account. However, if you paid instead with cash or a check, the recipient would have to make a trip to the bank to deposit the money.
FinTech Trends
Over the years, fintech has grown and changed in response to developments within the wider technology sector. In 2022, this growth was defined by several prevailing trends:
- Digital banking continues to grow: Digital banking is easier to access than ever before. Many consumers already manage their money, request and pay loans, and purchase insurance through digital-first banks. This simplicity and convenience will likely drive additional growth in this sector, with the global digital banking platform market expected to grow at a compound annual growth rate (CAGR) of 11.5 percent by 2026.
- Blockchain: Blockchain technology allows for decentralized transactions without a government entity or other third-party organization being involved. Blockchain technology and applications have been growing quickly for years, and this trend is likely to continue as more industries turn to advanced data encryption. Check out our guide to blockchain technology if you’re interested in learning more.
- Artificial Intelligence (AI) and Machine Learning (ML): AI and ML technologies have changed how fintech companies scale, redefining the services they offer to clients. AI and ML can reduce operational costs, increase the value provided to clients, and detect fraud. As these technologies become more affordable and accessible, expect them to play an increasingly large role in fintech’s continued evolution — especially as more brick-and-mortar banks go digital.
The Technologies That Power FinTech
Modern fintech is primarily driven by AI, big data, and blockchain technology — all of which have completely redefined how companies transfer, store, and protect digital currency. Specifically, AI can provide valuable insights on consumer behavior and spending habits for businesses, allowing them to better understand their customers. Big data analytics can help companies predict changes in the market and create new, data-driven business strategies. Blockchain, a newer technology within finance, allows for decentralized transactions without inputs from a third party; tapping a network of blockchain participants to oversee potential changes or additions to encrypted data.
How Safe is FinTech?
FinTech companies are generally trusted by consumers —according to Forbes, 68% of people are willing to use financial tools developed by non-traditional (e.g., non-financial, non-banking) institutions. However, many fintech applications are relatively new, and they’re currently not subject to the same safety regulations as banks. This doesn’t mean that consumers shouldn’t trust fintech companies with their money — it just means that being careful can be beneficial. For most consumers, the benefits of working with a fintech company outweigh the perceived risks.
Different Types of FinTech
FinTech has been used to revolutionize financial institutions for millions of people across the globe, changing how we pay each other, buy stocks and other financial instruments, and access financial advice. There are many different fintech companies offering unique services for their clients. Here are a few prominent examples:
Robinhood (Stock Trading)
Robinhood is one of many apps that facilitatesdigital stock trading, meaning it distills the traditional broker-client relationship into an easily accessed online interaction. Robinhood’s founders saw that most investment platforms charged high fees to their customers, even though executing trades doesn’t cost much. In response, the company launched its fee-free trading platform, allowing smartphone users to trade stocks more freely. The service offers commission-free stock trading and exchange-traded funds; it has also recently started offering cryptocurrency trading for its users.
Venmo (P2P Payments)
Venmo is a popular example of a P2P payment resource, or a service that allows users to perform transactions quickly through direct digital file-sharing. Companies like Venmo make it easy for people to initiate free transactions with their friends and family or low-fee payments to businesses. Most notably, the company frames its transactions through a social feed, making it possible to share and display payments with a friend list. Services like Venmo have capitalized on an increasingly cashless society via smart devices and social networking.
Klarna (E-Commerce)
Klarna is a fintech company that provides payment services for e-commerce, or, broadly, any activity comprising a digital transaction. Specifically, Klarna features direct payments, pay-after-delivery options, payments for online storefronts, and installment plans. The service is a regulated bank that allows customers to purchase something on a “buy now, pay later” model, with products being purchased on interest-free or low-fee installment plans. Splitting a transaction in this way allows consumers to pay for a product over time instead of all at once.
Wealthfront (Wealth Management)
Wealthfront is a fintech robo-advisor —a fintech platform that helps its users by automatically investing their money and providing financial advice based on their goals. Robo-advisors use computer algorithms and special software to build an investment portfolio without input from a financial advisor. The software automatically invests and rebalances investments based on a user’s needs, goals, and market conditions. Wealthfront, in particular, offers automatic rebalancing, daily tax-loss harvesting, and other services rooted in automated investing, which can benefit investors by making their investments easier to manage without traditional manual intervention.
Square (Business Payments)
Square is a point of sale and payment service for businesses, meaning it allows businesses to accept credit cards on a smartphone, tablet, or terminal. Before companies like Square, small businesses sometimes had trouble accepting credit cards due to high fees and difficult-to-use equipment. Square provides an easy-to-use process that allows businesses to accept payments, print receipts, and offer virtual gift cards to their customers.
How to Learn FinTech (and the Five Skills You Need)
FinTech is a growing field offering a variety of job opportunities for those with relevant experience. Are you interested in a career in fintech? Here are a few pathways for learning key industry fundamentals — plus several key skills to hone right away.
Educational Pathways in FinTech
FinTech Boot Camps
FinTech boot camps provide a space for students to get started quickly in fintech. Boot camps provide structured learning opportunities and hands-on experience for students interested in the field. Boot camps are both personalized and intensive — they offer thorough curricula simulating real-world experiences but they often can be pursued remotely, in a schedule-friendly manner. Columbia Engineering FinTech Boot Camp, for example, offers a base for anyone wanting to get started in fintech within just 24 weeks, including flexible modules covering everything from financial analysis to algorithmic trading and blockchain transactions.
Degrees With a Focus on FinTech
When it comes to traditional degrees, more colleges are offering degrees with a focus on fintech as the field grows. These programs allow students to learn the specifics of a traditional finance major while developing the technical skills that may be potentially valuable in fintech. These programs typically take 2-4 years to complete, depending on the degree program and how many classes a student can take at once.
Self-Taught FinTech Options
There are also many resources available for those wanting to learn fintech on their own, including free online courses, educational multimedia and apps, and digital guides. Self-teaching options are ideal for those favoring a fully autonomous learning structure, offering the chance to learn industry basics along with personal organization and time management skills.
Key FinTech Skills
- Programming
- Cybersecurity
- AI/ML and Data Science
- Blockchain
Programming
A vast majority of fintech entities use mobile applications or websites to broaden their reach and increase consumer value. Programmers and software developers are primarily responsible for building and maintaining these fintech sites and applications, designing them to be secure, efficient, and navigable. Popular fintech programming languages include Java, C++, Python, and Ruby.
Cybersecurity
Most modern fintech companies are data-driven and often connected to vast digital networks which deliver new experiences and possibilities for users. This framework provides a great deal of value, but it can also increase the risk of cyberattacks and security breaches. Therefore, aspiring fintech professionals can benefit from a working knowledge of cybersecurity; studying how it is used to protect fintech companies from hackers and other cyber threats.
AI/ML and Data Science
Today’s fintech users generate quite a lot of data, and many fintech companies use this data to personalize their services and deliver additional value. Big data can be used to make financial predictions based on client behavior; managing finances for clients and leading to critical insights that enable stronger, more informed decision making. For this reason, ambitious fintech professionals will want to have a basic understanding of data analysis, as it will likely play a role in their long-term career.
Specifically, artificial intelligence (AI) and machine learning (ML) algorithms are regularly used to process and analyze large amounts of data; in doing so, they allow companies to generate actionable insights. AI/ML algorithms can lower risk, increase returns, automate processes, and make predictions for the future — and as a result, they stand as a valuable data-oriented skill for anyone wanting to work in fintech.
Blockchain
As cryptocurrency continues to become a prominent fintech sector, the need for blockchain savviness has grown to follow suit. It helps aspiring fintech professionals to have at least a working knowledge of blockchain’s underlying architecture and encryption attributes — as well as its various uses and implications in the broad trading, lending, and reconciling of currency all over the world. Blockchain-based cryptocurrency is expected to disrupt the financial industry for years to come, so having this type of skillset can make the transition easier to navigate.
FinTech Careers, Job Outlook and Salaries
FinTech has spawned a growing range of job opportunities for those interested in the field. Here is a quick overview of a few such careers:
Financial Analyst
Financial analysts help businesses make decisions that can lead to stronger future returns. They employ high-level critical thinking to assess the performance of stocks, bonds, and other financial instruments. Currently, job prospects for financial analysts are strong. According to the Bureau of Labor Statistics (BLS), the field is expected to grow by 5 percent by 2029, and the median pay for a financial analyst was $83,660 in 2020.
Information Security Analyst
Information security analysts plan out and execute security initiatives to protect computer systems and data from unauthorized access — a must for today’s fintech companies. Job prospects for information security analysts are incredibly strong. According to the BLS, the job outlook for information security analysts is expected to grow by 31 percent by 2029, which is significantly faster than the average for all industry occupations. The median pay for information security analysts in 2020 was $103,590 — also much higher than the national average.
For further reading, see our recent guide on how to become an information security analyst.
Blockchain Engineers
Blockchain companies and applications are a growing part of the fintech ecosystem. Blockchain engineers design, build, and maintain decentralized blockchain applications like cryptocurrency exchanges, lending applications, and voting platforms. According to CareerOnestop, the median salary for a blockchain engineer in 2020 was $92,870, and the number of jobs in the field is expected to grow by 6 percent by 2029.
Meanwhile, you can also consult our guide on the top fintech careers if you want to learn more about other opportunities in the field.
FinTech FAQs
What skills do you need for fintech?
There is a wide range of jobs available in fintech, and many of them are built around skills in programming, cybersecurity, AI/ML, data analysis, and blockchain. Completing an online fintech bootcamp is a great starting point for learning such skills on your journey to a new career.
Is PayPal fintech?
Yes, PayPal is a fintech company. In fact, PayPal is one of the largest fintech companies in the world, and it was also one of the first companies to operate in the space. The company is a global giant that has changed how many of us transact online.
What is the difference between FinTechs and banks?
FinTechs and banks provide different services for their clients. Traditional banks are institutions usually comprised of both brick-and-mortar locations and digital entities, and they are licensed to collect deposits and use them to fund loans for customers. FinTech, on the other hand, broadly refers to any technology aimed at facilitating and streamlining digital transactions. Fintech has been adopted by countless businesses to improve their financial services and, in many cases, make their products more accessible. Most of the time, fintech companies store customer money in a bank account and provide additional services and value to the client.
Will FinTech replace banks?
At this point, it is unclear if fintech resources will one day completely replace brick-and-mortar banks. However, if they do, they would likely be subjected to the same government regulations as existing banks and have to change how they operate.
Do you need to know coding to work in FinTech?
Coding isn’t strictly necessary to get into fintech, but there are many software engineering and coding-related jobs available in the field. Having a strong familiarity with coding gives an individual a wider range of potential fintech employment opportunities.
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