Financial technology (also known as Fintech) uses new technologies to streamline finance functions like accounting, fraud monitoring and customer service. Banks, credit unions and even investment firms have adopted fintech tools to stay competitive in a rapidly changing industry.

Many people think of cryptocurrencies and blockchain when they hear the term “fintech” but that’s just one part of a much larger picture. The most important innovations in this field focus on broader issues related to democratizing financial services and expanding access to them.

One of the most important goals of financial technology is improving a system that has been in place for centuries. For example, the emergence of digital tools has enabled a wide range of new players to emerge that offer mortgages, investments and loans to consumers who may not be served by traditional banks or insurance agencies.

The first step in this process is digitization, which allows information to be easily transmitted over long distances. This was a major milestone when the first transatlantic cable went live in 1886 and Fedwire began transferring funds between banks three years later.

The second stage is decentralization, which gives individuals and small businesses the opportunity to bypass large financial institutions and get directly in touch with lenders and investors. The emergence of peer-to-peer lending platforms, for example, has made it easier to secure small business loans and personal loans from private individuals. Other examples include online discount brokerages, which have lowered the cost of trading and robo-advisors, which offer low-cost automated investing services.

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