Technology has become a huge and inevitable part of everyone’s lives, and in business. The more time passes, the more clear it becomes that businesses that don’t invest in technological solutions will stay behind. Research, for example, has changed a lot and innovative companies like us here at Smart Research are taking advantage of technology to expand and prosper. Technology has also changed how financial institutions look like, with the arrival of fintechs. This type of financial company has exploded in the last few years, and today we will understand a little bit more about why fintechs are so popular now.
What are fintechs
The word fintech is an abbreviation for financial technology, and it’s used to refer to startups or companies that develop digital financial products. As the name itself suggests, the main difference between them and traditional financial companies is the use of technology. Differently than conventional banks, fintechs allow clients to control the products through their smartphone in a completely remote way.
The products and services fintechs offer are basically the same any bank has: a bank account, credit and/or debit card, loans etc. But even though the services are the same, clients see more advantages in using it instead of traditional financial services. Being able to manage everything on the smartphone, for example, and not needing to go to the bank are some of them. These advantages are some of the reasons why fintechs have become so popular now.
Along with these less bureaucratic, more intuitive solutions, there is also the fact that most of them have few to zero costs. An example are the credit cards with no annual fees, or the free digital accounts a person can create. This free access to these services, which does not happen in normal banks, is made possible because fintechs are already created into the digital world, with no need for a physical structure. Then, without the demand to build facilities, for example, the operational cost is reduced and the offer of tax free services becomes possible.
Fintech growth in Brazil
The most recent Finnovation Fintech Map, published in 2019, shows that there are 504 operating fintechs in Brazil, distributed through 10 segments. This number represents a 34% growth in comparison to the previous year. Another interesting data is the amount of B2B fintechs, which is becoming a global trend and increased from 48 to 61%. This growth includes, mostly, fintechs that are being created to collaborate with large financial institutions, to help them better attend their clients’ needs.
The age of fintech founders can also be one of the contributing factors for their success. According to an MIT study, entrepreneurs who are over 40 have a significantly higher chance of success in their business, and the Finnovation Fintech Map shows that 58% of fintech founders are over 35. Only 6% of them are less than 25 years old, which points to a more mature and experienced founder profile. That is probably why 72% of Brazilian fintechs have surpassed the first two years of “death valley”, where studies show that most companies don’t survive.
It is clear to see that fintechs are thriving all around the globe, and in Brazil as well. The intuitive and tax free financial services offered by these companies are constantly attracting more users, and this is giving the push fintechs need to quickly become unicorns. It is definitely a prosperous market that, as many other digital services, has been proving its strength and that it’s here to stay.