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Finance glossary

What is Financial Technology (FinTech)? Defined with examples

Bristol James
4 Min

FinTech is the shortform of Financial Technologies, an all-encompassing term used to describe modern day technology, software or applications focused on improving or automating financial management. FinTech companies usually leverage digital channels to create innovative web-based solutions and mobile applications used by consumers and businesses alike.

Financial technology has several subcategories all focused on providing greater convenience through digitisation and automation for an array of goals and pain points, including areas like banking, payments, investing and more. Increasingly, Finance and Accounts Payable (AP) teams are using technologies like enterprise resource planning (ERP) and digital invoice management to work smarter, faster and safer.

Why is FinTech important?

In Australia, FinTech is one of our fastest growing industries, with five more FinTech companies opening in just the last five years. With a current valuation of more than $45 billion, Australia’s financial technology industry is ranking among some of the most valuable and exciting in the world. As of June 2023, there were +1000 FinTech companies operating within Australia, with plenty more to come based on the current rate of growth.

Additionally, functions like AP are cost centres, and it’s becoming more expensive to run organisations’ cost centres. To counterbalance those costs, businesses need to find more efficient ways of working, which often requires digitising and automating previously manual processes.

Another factor is talent retention. It can be hard to find and maintain the right talent in areas like Finance and AP, but improving employee experiences can help. And the less that employees need to perform manual, tedious or low-value tasks, the better their experiences tend to be. FinTech solutions can help automate some of these tasks and free employees to focus on higher-value tasks and more satisfying projects.

FinTech categories and examples

The FinTech category is a big one, with competing brands looking to solve problems or automate anything and everything related to the financial industry. To highlight a few categories, we can look at:

Payments, banking and transfers

The traditional banking models are struggling to keep pace with the advancement and release of modern-day FinTech banking. Australian brands such as Wise and Revolut are gaining market share by offering a smoother user experience when it comes to opening accounts, lower banking fees and competitive pricing for managing and transferring money across different currencies.

Lending

Capitalising on another highly sought after part of traditional banking, other Australian FinTech companies such as Nimble and Lendi provide easy access to financial loans, including car financing and home loans.

Personal financial management (PMF) and wealth management

These are applications focused on assisting consumers with their investment strategies, budgeting, setting attainable savings goals and planning for retirement. Platforms such as TradeStation, which can be used in Australia and the USA, offer a sophisticated trading platform for stocks, ETFs, Crypto and more.

Payment protection

With the rise of cyber threats and scams focused on individuals and businesses, it’s important to look at ways we can increase security and reliability when it comes to payments and electronic funds transfers. In fact, we recently did a deep dive into the Australian Signals Directorate (ASD) report, which highlighted Australians face cyber-attacks every six minutes. That’s where brands like Eftsure come in with our end-to-end payment protection software, focused on mitigating the risk of payment error, fraud or cybercrime.

How is FinTech regulated in Australia?

There are several regulators and agencies who oversee the applicable FinTech businesses (source).

Australian Securities and Investment Commission (ASIC)

Australia’s integrated corporate, markets, financial services and consumer credit regulator. Essentially, they focus on improving the performance of the Australian financial system and those who operate within it, promote transparency and informed participation by consumers and investors, and govern legal compliance in these spaces.

Australian Prudential Regulation Authority (APRA)

APRA is responsible for ensuring our financial system is competitive, stable and efficient. They focus on the supervision of institutions in the banking, insurance and superannuation space.

Australian Transaction Reports and Analysis Centre (AUSTRAC)

The AUSTRAC is focused on anti-money laundering and counter-terrorism laws. They are Australia’s Financial intelligence agency responsible for monitoring, detecting and preventing criminal abuse when it comes to Australia’s financial system.

Office of the Australian Information Commissioner (OAIC)

The OAIC is focused on protection of sensitive information and data. Through administration of the Privacy Act 1988, they focus on consumer protection and regulating the handling of personal information by large government agencies.

Australian Competition and Consumer Commission (ACCC)

Australia’s national competition, consumer, fair trading and product safety regulator. Some Fintechs may be subject to regulation under the ASIC Act (referenced above), while others will be subject to the same provisions under Australian Consumer Law. This protects consumers from falling subject to misleading, deceptive conduct or unfair terms.

Reserve Bank of Australia (RBA)

The RBA is Australia’s central bank, focused on conducting monetary policy, determining payments system policy, and working to maintain a stable financial system. They issue the nations physical currency and oversee banking services to the government and its agencies.

Australian Financial Complaints Authority (AFCA)

The AFCA provides free, fair and independent dispute resolution for financial complaints about superannuation, banking deposits, payments, investments, insurance and credit or loans. They primarily provide their services to consumers, however in some instances they may extend their support to other wholesale clients or firms.

Council of Financial Regulators (CFR)

Last, but not least, on our extensive list of governing bodies we have the CFR. The CFR is the coordinating body for Australia’s main financial regulatory agencies. In a less formal manner, without the use of policy, they consult and promote stability in Australia’s financial system.

In summary:

  • FinTech is the shortform of Financial Technologies, an all-encompassing term used to describe modern day technology, software or applications focused on improving or automating financial management.
  • FinTech is one of Australia’s fastest growing industries, currently worth +$45 billion.
  • There are several governing agencies in Australia focused on regulating the FinTech industry for the protection of businesses and consumers.

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