Know Fintech, Technology-Based Financial System in the Digital Era
When compared to ten years ago, currently technology has experienced very rapid development. Not only in the field of technology itself but also spread to other fields. No exception to financial technology.
Thanks to the development of financial technology, various financial activities can be done easier and more practically so saving time and energy.
Starting from transactions through smartphones, paying by e-money, even investigating, everything can now be done easily. Maybe you don’t realize it, but Fintech is part of these things.
What is Fintech?
Yes, in the last few years, the term Fintech has become a lot of talk. However, what is meant by Fintech? Fintech stands for Financial Technology, namely the merger between technology and financial or financial systems.
According to the National Digital Research Center (NDRC), Fintech refers to innovation in the field of financial services or financial innovation that has given a touch of modern technology.
This definition is not much different from what Bank Indonesia explained. On the official website, Bank Indonesia defines Financial Technology as a combined result of financial technology and services, which changes the conventional business model to become moderate.
So, which at first must make a transaction by meeting directly or face to face, can now be done even with a matter of seconds.
What are the benefits given by Fintech?
Thanks to the use of technology combined with the financial system, Fintech also managed to provide many benefits in various scope of life. Starting from facilitating financial services to support financial inclusion, these are some of the benefits of Fintech that you need to know.
- Ease of Financial Services
One of the benefits offered by Fintech is the ease of financial services, perhaps the benefit of this one is the most felt. Try to compare with ten years ago. When you want to transfer money, you might have to go to the ATM or teller at the bank. This is certainly quite troublesome because it takes a short time. Not to mention if you have to queue, it is certainly more time wasted.
However, such a thing can be simplified thanks to Fintech’s presence. Now, you can transfer money only through a smartphone.
Even some Fintech services also allow you to pay various monthly bills, for example, electricity, telephone, and BPJS. You can also save time and energy because they don’t need to leave the house to do the transaction.
- Help MSME get lower flowering business capital
Before Fintech’s emergence, the majority of MSME players in Indonesia relied on bank loans to get business capital. Of course, there is nothing wrong with this. However, you need to remember again if the bank loan usually has a fairly high interest. Not to mention the procedures and requirements are generally quite difficult.
Fintech is the best solution to help advance MSMEs. At present, there are quite some Fintech service providers in Indonesia that offer business capital loans with interest relatively lower when compared to bank interest.
This system is also called peer-to-peer (P2P) Lending, which is an online-based platform practice that brings together MSME players who need funds with people who are willing to invest in lending their money.
- Supports financial inclusion
Financial inclusion refers to access to community financial institutions. In 2019, the National Council of Inclusive Finance (DKNI) targeted 75% of financial inclusions. However, until now the target has only reached 49%. That’s why the Indonesian government develops a financial inclusion policy to target people who are at the lowest economic pyramid. Generally, this society lives in remote villages.
Fintech is an alternative solution to help achieve the financial inclusion target. Generally, online-based Fintech services can be more accessible as long as anyone has an internet network.
Fintech types at this time
In practice, Fintech has many products and services that you can use. However, Bank Indonesia divides the classification of Fintech types into four types, namely:
- Peer-to-peer (P2P) Lending and Crowdfunding
The first classification is P2P Lending and Crowdfunding, which can be said as a financial marketplace. This one platform brings together those who need funds with those who are willing to provide funds for investment. The process tends to be more practical when compared to conventional banks because it can be done in one online platform. Examples of P2P Lending service providers are my capital, while for example crowdfunding is we can.
- Payment, Clearing, and Settlement
For those who often use payment gateways or e-wallets, these two products include this payment, clearing, and settlement category. Both are organized by Bank Indonesia, for example, the National BI Clearing System (SKNBI) or other financial startups such as Xendit, Kartuku, and DOKU.
- Risk Management and Investment
Through this type of Fintech category, you can monitor financial conditions while carrying out financial planning more easily and practically. Generally, Fintech risk management and investment are present in the form of applications that you can access from smartphones. You only need to fill in the data needed to be able to control the finances as needed.
- Market Aggregator
Fintech for the market aggregator category refers to the portal that collects a variety of financial-related information to be presented to users or target audiences. This information varies, can be about financial, investment, to credit card tips. With the market aggregator, it is hoped that you can get the right information before making financial related decisions.
With the existence of an applicable legal basis, both providers and Fintech users can carry out various financial activities safer and more comfortably. You don’t need to worry about using Fintech because the bank ensures consumer security, especially for your data and information confidentiality. On the other hand, the bank also ensures that every provider of products or Fintech services has complied with stipulated regulations.
The existence of Fintech is proof that technology can provide the convenience needed by the community in carrying out various financial activities, both transactions to investments. Given the number of users who are quite high, it is not impossible in the future there will be a variety of innovations in the world of Fintech.