The fintech ecosystem refers to the environment where technology is used to perform financial activities so that the financial institutions can combine, integrate and develop internal and external innovation processes.
It is an idea that instructs how to create a suitable environment that synergizes all types of financial requirements with the collaboration of technology services. This consists of the traditional financial market, new technology, digital disruption, government regularities, etc.
Small scale start-ups to large business groups, the banking sector, Fintech, and the government are part of this ecosystem.
Attributes of Fintech Ecosystem:
There are four core attributes of a FinTech ecosystem:
Demands made by end-client of financial institutions, government, and consumers demand to be fulfilled.
The technical and entrepreneurial talent core is required to implement the system.
The financial requirements for any venture must be fulfilled.
This includes government regulation, tax, audit, and digital public infrastructure applied to the Fintech ecosystem.
If these four attributes are considered and implemented successfully, then these four attributes make a perfect ecosystem. These four attributes work circularly.
Components of Fintech Ecosystem:
Traditional Financial Institute:
Banks, NBFC, insurance companies, stock market and brokerage industries, venture capitals, microfinance, etc., are counted in this category. These are old-school boys, already served the market for so many decades. But before digital disruption, their criteria were local and limited.
Borrowers fall in this category. These borrowers may be a person or an organisation. Their scope for capital is fixed and limited.
These organisations are not that much wealthy as traditional organisations, but they have so many benefits over the traditional ones. These are technically advanced. They can serve anyone worldwide. Payment, wealth management, crowdfunding, capital market, and portfolio management are the primary services provided by Fintech.
These are specific target-oriented IT industries that make Fintech solutions. These solutions offer data clustering, research, and analysis, cloud computing, Blockchain management, social media development, etc.
Here government refers to the regulations and legislature applied by the government.
Field-wise list of digital disruption and new innovative changes applied in Fintech:
Fintech represents the new innovative ideas and involvement of technology. Let’s find out innovations in each field.
Innovations in Payments, Clearing & Settlement field:
- Mobile and web-based payments
- Digital currencies
- Distributed ledger
Innovations in Deposits, Lending & capital raising field:
- Peer-to-peer lending
- Digital currencies
- Distributed Ledger
Innovations in the Market provisioning field:
- Smart contracts
- Cloud computing
Innovations in the Investment management field:
- Robo advice
- Smart contracts
Innovations in Data Analytics & Risk Management field:
- Big data
- Artificial Intelligence
A good ecosystem should focus on these elements:
- Admire the Fintech and develop financial markets
- Enable new technologies
- Promote financial inclusion
- Closely monitor the developments for advancement
- Should opt for the regulatory framework and supervisory practices to maintain stability
- Restructured the local yet global competition and commitment
- Improvised security to maintain the integrity of financial systems
- Should focus on the development of robust financial and data infrastructure
- Try to improve and enhance the global cooperation
The fintech ecosystem refers to the combined working environment of traditional finance industries, Fintech and government. This ecosystem needs to be designed in a simple yet effective manner. This design should focus on identifying the primary attributes, components, and innovations involved. A good ecosystem helps in the overall growth of the financial condition of any country.