What Is Fintech?
2021 has shed light on the weaknesses and gaps of existing financial service systems. This, in turn, has updated and accelerated the development of new trends, including:
1. Embedded finance
The Oracle Corporation conducted a study, according to which 69% of users would like to receive all financial services online. Today, there are many applications for this in all directions: from payments and insurance to loans and investments. However, this user experience is already non-unique. Clients want to receive services “embedded” without additional applications, and even more so without visits to branches. This is why banking outside of banking applications has gained significant popularity in 2021.
With the help of embedded finance tools, a car rental company, for example, can offer customers the opportunity to immediately take out insurance while renting a car on the same platform, or a potential customer can get a loan directly on an online store’s website without any additional applications. This trend is actively promoted by neobanks and fintech companies such as Stripe, Starling, and others.
Many merchants, like Amazon and Uber, have effectively implemented the described case. Financial services are becoming an integral part of non-financial products. Due to this, financial institutions receive new users and more data, while non-financial institutions increase their value and uniqueness. This trend was preceded by the development and formation of the BaaS model, thanks to which every business can receive and provide customers with a full package of banking services.
2. Changes in user behavior and impact on market development
Quite a long time ago, the variety and convenience of fintech solutions forced banks and financial institutions to reconsider their attitudes toward user experience. If earlier they built processes around their own tasks, then today it is the needs of users that are the driving force behind the financial industry’s development.
In connection with the pandemic, when even the WHO recommended switching to non-cash payment methods in order to avoid the spread of the coronavirus, the behavior and habits of fintech users have changed dramatically and will continue to evolve in the foreseeable future. The popularity of various payment methods (contactless payments, e-wallets, online payments), financial literacy, and consumers’ fintech product awareness have significantly increased.
Clients no longer have the patience for filling out long forms or the tedious processes of uploading, printing, and scanning documents. The more users are aware of existing fintech opportunities, the higher the demand and, accordingly, the faster the developmental pace. A 2019 EY study showed a 64% application of fintech solutions among all countries globally, with three out of four consumers utilizing the services of fintech payment platforms. It can be assumed that these numbers have only grown during the pandemic. The user of 2021 is more active and interested, but also much more demanding, which significantly affects the market, its participants, regulation, and the versatility of products and services. It’s valuable to remember the impact of Generation Z, whose needs influence the formation of a significant number of tech trends, from banking in instant messengers to a voice assistant when using financial products.
3. Investing in startups
According to CB Insights, in the third quarter of 2021, the value of venture capital investments in fintech amounted to $10.6 billion, which is, on average, equal to previous years. However, total fintech deal volume fell 24% from Q3 2020. Thus, 60% of the total fintech project financing in this quarter came from 25 mega-rounds (a deal worth more than $100 million), while financing of smaller deals decreased by 16% compared to the second quarter of 2021. This percentage of financing for fintech giants has not been seen since the second quarter of 2018, when Ant Group raised $14 billion.
A similar situation was observed separately in one of the fintech world’s centers: the United Kingdom. In the first half of 2021, UK startups invested 22% more (£1.8 billion) than in the second half of 2020. However, most of that amount was invested in just five companies: Revolut, Checkout.com, Starling Bank, Onfido, and Thought Machine.
In 2021, following the historical events of 2020, it has been more difficult for fintech startups to raise capital in the early stages, as venture capitalists target mature, “safe,” and successful tech companies. However, some of the deals delayed in 2020 were implemented in 2021, and projects that are promising and necessary in the current realities received the support of venture investors, because according to the data, there is $265 billion circulating in the European venture capital market.
The priority areas were medicine and healthcare, recovery of the most affected sectors of the economy, remote education, environmental protection, new payment methods, and investment instruments.
What Is a Fintech Specialist?
Since the world’s digital revolution is ongoing, which implies the automation of business processes and the active use of digital technologies, the labor market inevitably creates a demand for workers with fundamentally new knowledge and skills required for fintech. At the junction of finance and technology, the profession of a fintech specialist appears. In ten years, according to Deloitte forecasts, hybrid professions will occupy up to 70% of the entire labor market.
The very concept of a fintech specialist is sometimes incorrectly substituted with that of an IT specialist, limiting its breadth to specific technologies (for example, big data or blockchain), analysts, and developers. In reality, financial technology companies need not only analysts and developers, but also IT architects, project managers, product scientists, information security experts, economists, and lawyers — but with cross-functional competencies. They must be able to develop, implement, maintain, and promote projects both in the fintech field and in the global digital environment. They must have unique problem-solving skills, along with an understanding of how they can effectively embed (and even anticipate) digital changes in their personal work and in their employer's business overall.
Thus, a fintech specialist combines the knowledge and skills of a fintech programmer, a digital marketer, and a product manager, with experience in an internet project or a fintech startup. The top managers boast many years of successful experience in online services monetization.
What Fintech Skills Are in High Demand?
As we mentioned earlier, the widespread construction of a new payment infrastructure has spawned a new formation of e-commerce specialists. Let’s discuss the skills that make them so valuable and unique.
Multitasking is the ability to perform several processes at the same time, switching from one task to another seamlessly. Initially, the term was used purely in the programming environment, but it gradually migrated to the fintech industry.
The multitasking mode in work is a combination of analytical thinking, a solid systems approach, and a high level of organization. Even if you don't consider these properties your innate traits, you can develop them with practice.
Continuous improvement and the release of new products are the main features of a tech-based financial business. Client managers in this industry must be aware of all trends, novelties, and competitive solutions in the market, constantly learning new things.
This does not only apply to the technology skills required for fintech. Once upon a time, personal VIP account managers at large banks were more accurately professional lobbyists and networkers. They expanded their client bases through referrals and connections, never missing a significant industry trade show or conference. These same skills have always been and always will be in demand among fintech client managers.
Conferences today are not only a way to make useful contacts, but they also function as expert training. A customer care professional must be able to use all the communication channels that are convenient for the customer and continually scrutinize those channels for new opportunities.
For example, in the United States and Western Europe, social networks (in particular, LinkedIn) have become the main channel of interaction in the B2B sector, in addition to email. Still, email and face-to-face communication remain the main ways businesses communicate with financial service providers. This means that a good customer service specialist in fintech should be able not only to speak beautifully and show empathy, but also to conduct business correspondence competently.
If you've seen your client manager at an industry conference or trade show, that's a good sign.
3. Business Management
The ultimate goal of every company is to operate like a well-oiled machine — and the person responsible for making this happen is called a business manager. They provide their employees with all the resources needed to get their jobs done on a daily basis. So, when a company has a good leader, there is someone to keep the machine running.
Business management includes a set of activities related to planning, organizing, and managing business objects. For any fintech company to grow, it is necessary to properly agree on a set of operations and their coordination, which is the task of business management.
1. Extended Expertise
All modern providers of financial services, payment solutions, insurance, and wealth management have grown from small startups where good customer service has been and remains both a part of the business model and a competitive advantage.
According to a Salesforce survey of 2,600 global customer service professionals, 78% of B2B customers change providers when the level of service they receive is unstable. 68% of managers say that even one unpleasant incident is enough to think about changing their providers. Therefore, the main difference between outstanding and inadequate fintech client managers is competence.
A payment platform is a difficult product to set up and maintain, and clients often need advice in the process. The manager should not only answer any request as clearly and quickly as possible, but should also thoroughly know your product, understand the peculiarities of national legislation, and be able to explain technology acquisition, algorithms for combating internet fraudsters, and much more.
A good client specialist is attentive to the little things and knows how to talk simply about the complex.
The client manager of a fintech company should be personal for each client. They know how to hear and listen, immediately delve into the client's problem, consider it from different angles, and offer an optimal solution.
2. Programming Skills
Today, in the digital era, programming is becoming a full-fledged international language of a new format. Perhaps in the future it will become as natural for an educated person as the ability to write, read, and count.
It is obvious that practical knowledge of information systems and technologies is a basic skill that cannot be dispensed with. Technical expertise allows you to objectively check the achievability of desired project results and compare these results with organizational capabilities and constraints.
A specialist in a fintech company needs the ability to work in a specialized team development environment, along with an understanding of the principles of distributed systems architecture, mathematical models, and processes used for risk analysis. Also, such an employee must know the principles of automation and monitoring, technologies and specifications, and testing methodology.
A fintech manager must be able to assess technical risks and competently answer questions from developers, programmers, analysts, and engineers. All this is impossible without sufficient knowledge and experience in the IT field.
3. Data Analytics
An analyst's work involves the use of SQL, Python, and other programming languages, creating dashboards, and automating processes. But these are just tools to achieve two goals:
Make decisions more objectively based on facts and data (as opposed to opinion, intuition, and experience).
Look for points of growth for both the product and the business.
The analyst concentrates on exploring data, structuring complex financial systems, and understanding processes to benefit the business. The fintech analytics product is composed of the answers to both asked and unasked questions, the creation of thinking models and frameworks, and recommendations derived from them, which lead to an increase in business performance.
The best way to achieve this in most cases is by working with data, but that’s not always necessarily true. Analytics help make decisions that lead to actions in the product and business. In some cases, you can make a decision without analyzing the data, simply formalizing all possible situations and solutions and then discarding most of the options, relying on what the team already knows.
It's not about industrial programming. As a data analyst, you need to be able to read documentation, quickly understand and use data manipulation tools, and also automate your routine.
4. AI & ML Knowledge
The stage of artificial intelligence being trained to solve artificial problems — such as playing Go, chess gambits, or analyzing unnatural algorithms and events — is almost over. A new stage of introducing neural networks into real aspects of human activity has begun, from modeling exchange trends and managing city traffic to genome analysis and drug development. AI developers are actively working on the implementation of neural networks in the financial sphere. AI will soon become a faithful assistant to any trader, and in the future, when training neural networks in the behavioral patterns of a particular person becomes the norm, AI will be able to trade for people in the same way the users themselves would trade, only more efficiently and 24 hours a day. This is why a fintech manager must have basic knowledge of artificial intelligence and machine learning.
5. Cybersecurity and Blockchain
Nowadays, no industry can do without adequate knowledge of cybersecurity — especially fintech companies. Both startups and large firms need to be confident in the security of their data. Therefore, a good fintech manager should be able to:
Information systems are expanding every day in the financial sector, and from this comes a growing need for specialists with an understanding of cybersecurity basics. This has become especially popular in the wake of an increase in cybercrime. Hacker attacks and virus launches have become common practice in modern computer infrastructures.
The use of blockchains makes it possible to execute contracts and agreements without the participation of lawyers and bureaucratic red tape, making investments secure by using smart contracts to effectively manage risks. In addition, with the help of this technology, it is very convenient to confirm copyrights, and indeed, blockchain technology can be applied in a wide variety of areas, from trading to voting in elections.
Thanks to blockchain technology, you can eliminate third-party participation in financial transactions. You can also store and transfer funds without the participation of a bank, because, as we have already said, blockchain systems have successfully implemented the ability to confirm identities, register transactions, and execute contracts. Also, decentralized platforms can be used for inventory and asset management, management of transport and logistics processes, trading, tracing the origin of goods and materials, optimizing supplier identification, signing procurement contracts, and auditing and tracking transactions.
Thus, this technology finds its application not only in the banking and financial services market, but also in many other market sectors, making the lives of customers more convenient and simple. Therefore, an equally important skill for a fintech specialist is understanding the basics of blockchains.
6. Understanding of Finance
A fintech manager should know how to calculate and analyze various financial transactions, the basics of taxes, audits, and accounting, and the features of capital management to maximize profit. Also, the job cannot be done without the ability to form a long-term perspective of the business as a whole, to assess the prospects of projects and the competitiveness of various products and to control the financial and economic operations of the company. The competence of such a specialist also lies in the analysis of the advertising market.
A fintech specialist, using accounting and economic data, evaluates the financial condition of an organization and manages its financial flow. They are encouraged to understand the intricacies of both specialties.
7. Mathematics, Statistics, and Probability
To work in the fintech industry, you will also need knowledge of mathematics, statistics, and probability theory. In fact, this knowledge is a system of necessary calculations of the profitability of financial, investment, and trading operations over time, taking into account inflation, exchange rates, interest, and other legal and actual conditions for the fulfillment of contracts.
Financial mathematicians study payment schemes and the rules for calculating interest, but this is not their main function. They also give an objective answer to the natural question: "Which of the possible financial transactions is more profitable?" Few economic disciplines can boast of this specificity.
It is easy if the loan scheme or other transaction is simple. But how do you measure profitability in more complex cases when the flow of expenses and income is irregular? Not every economist will answer this question. Financial mathematics provides a toolkit for analyzing and comparing the profitability of various operations. It is able not only to show how profitability is calculated, but also to give practical suggestions and make an analysis of the economic meaning of the results obtained.
Understanding all of these processes will be a huge plus for a fintech specialist.
A fintech manager is very often the first representative of a product and service to the outside world. To do this, a successful specialist requires experience in various fields, such as programming, data analysis, and mathematics, along with enthusiasm and, of course, professional fintech management skills, good communication, and other abilities. These qualities help the specialist competently bring the product to the market, maintain the efficiency of the team, and also build trusting relationships with clients and partners.