Fintech
Also called: Financial technology · Topic: Payment Systems and Digital Finance · NCERT: Beyond NCERT
Meaning
Fintech, short for financial technology, is the use of technology to provide financial services more cheaply and to more people. The tools include mobile apps, data analytics (studying large amounts of data to spot patterns), APIs (secure links between computer systems) and blockchain (a shared digital record that is very hard to alter). Fintech matters for financial inclusion. It can reach people whom traditional bank branches find too costly to serve.
Example
A small shop owner with no collateral applies for a loan on a lending app. With the owner's consent, the app reads their bank transaction data through an Account Aggregator. It then approves a loan based on their cash flow, not on property. Other fintech examples are UPI payment apps, peer-to-peer (P2P) lending platforms and Buy Now Pay Later (BNPL).
Don't confuse with
- Digital public infrastructure (DPI): open, public systems such as Aadhaar and UPI, built as public goods. Fintech firms are usually private companies that build competing products on top of these public systems.