Financial technology is the new technology and innovation that aims to compete with traditional financial methods in delivering financial services and the use of smartphones for mobile banking. Investing services and cryptocurrency are examples of technologies aiming to make financial services more accessible to the general public. Financial technology companies consist of both startups and established financial and technology companies trying to replace or enhance the usage of financial services provided by existing financial companies.
After reviewing more than 200 scientific papers citing FinTech, the most comprehensive scientific study on the definition of FinTech includes that FinTech is a new financial industry that applies technology to improve financial activities. FinTech is the new applications, processes, products, or business models in the financial services industry, composed of one or more complementary financial services and provided as an end-to-end process via the internet. Financial technology has been used to automate insurance, trading, and risk management. The services may originate from various independent service providers, including at least one licensed bank, or ensure the interconnection is enabled through open APIs and open banking and supported by regulations such as the European Payment Services directive. Global investment and financial technology increased more than 2,200% from $930 million in 2008 to more than $22 billion in 2015.
The nascent financial technology industry in London has seen rapid growth over the last few years. According to the mayor of London, 40% of London's workforce is employed in financial and technology Services.
In Europe, $1.5 billion was invested in financial technology companies in 2014, with London-based companies receiving $539 million, Amsterdam-based companies $360 million, and Stockholm-based companies receiving $266 million in investment. After London, Stockholm is the second-highest funded city in Europe in the past ten years.
Europe's FinTech deals reached a five-quarter high, rising from 37 in Q4 2015 to 47 in Q1 2016. Since Britain's exit from the European Union, Lithuania is starting to become a northern European hub for financial technology companies. As per the stats, Lithuania has issued 51 FinTech licenses since 2016, including 32 from the last year in the Asia Pacific region. The growth will see a new financial technology hub be opened in Sydney in April 2015.
According to KPMG, Sydney's financial services sector in 2017 creates 9% of the national GDP and is bigger than the financial services sector, while Hong Kong launched financial technology innovation lab last 2015. In 2015, the Monetary Authority of Singapore launched a study initiative named FinTech and information group to draw in startups worldwide. It pledged to spend $225 million in the FinTech sector over the next five years. Financial magazine Forbes created a list of the leading disruptors in financial technology for its Forbes 2016 Global FinTech 50while a report published in February 2016 by EA commissioned by the UK Treasury compared seven leading FinTech hubs. It ranked California for talent and capital, the United Kingdom for government policy, and New York City first for demand.
Finance is seen as one of the industry's most vulnerable to disruption by software because financial services, much like publishing, are made of information rather than concrete goods. In particular, blockchains have the potential to reduce the cost of transacting in the financial system. While finance has been shielded by regulation Until now, and whether the.com boom without major upheaval, a new wave of startups is increasingly disaggregating Global banks. However, aggressive enforcement of the Bank Secrecy Act and money transmission regulations represents an ongoing threat to FinTech companies.
FinTech companies often face doubts from financial regulators like issuing banks and the federal government in addition to established competitors. Data Security is another issue regulators concerned about because of the threat of hacking and the need to protect sensitive consumer and corporate financial data. Leading global fintech companies are proactively turning to cloud technology to meet increasingly stringent compliance regulations. The Federal Trade Commission provides free resources for corporations of all sizes to meet their legal obligations of protecting sensitive data. Several private initiatives suggest that multiple layers of defense can help isolate and secure financial data. No matter how small, any data breach can result in direct liability to a company.
The online financial sector is also an increasing target of distributed denial of service extortion attacks. Marketing is another challenge for most FinTech companies as larger rivals often outspend them. Historical bank companies also face this security challenge since they do offer internet-connected customer services.