In simplest terms, fintech is short for “financial technology” but ask different people what it really means and chances are you’ll get different answers.

According to Wikipedia, fintech “is an industry composed of companies that use new technology and innovation with available resources in order to compete in the marketplace of traditional financial institutions and intermediaries in the delivery of financial services.”

The Fintech Club at Wharton University defines it more simply as “an economic industry composed of companies that use technology to make financial systems more efficient.”

And Chris Skinner, chairman of the Financial Services Club, posted on his blog a definition he heard at a meeting: “fintech is the R&D function of financial services in the digital age” that has “less to do with technology more to do with business model reinvention and customer-centric design.”

That might be the best definition of the three because as fintech’s influence on the financial services industry grows, it’s increasingly clear that fintech isn’t just about technology. Rather, fintech is really a customer experience innovation movement that uses technology but isn’t totally dependent on it.

A good example of this can be seen in the lending space, which is one of the markets that has been most disrupted by fintech. On the technology side, firms are using new sources of data and underwriting models to analyze prospective borrowers and make lending decisions. In some cases, fintech lenders are using their technology to extend loans to individuals and businesses that wouldn’t have been extended credit by old-school lenders. 

Many are also using their technology to make decisions much more quickly – sometimes near-instantaneously – eliminating the need for prospective borrowers to wait days or weeks for a lending decision.

These advances in and of themselves can facilitate dramatic customer experience improvements, but they aren’t simply related to behind-the-scenes technology.

For instance, many fintech lenders have created user experiences that drastically simplify the loan application process. Instead of having to fill out a bunch of complex forms by hand, many upstart lenders offer wizard-based online experiences that walk borrowers through the application process step-by-step.

Many lenders even allow applicants to grant them access to their financial accounts so that they can automatically pull the data they need to make a decision, eliminating the need for applicants to gather a bunch of paperwork they might not have readily available and dramatically reducing the amount of time it takes to complete the loan application.

Thanks to the combination of technology and thoughtful user experience, loan applications that could have taken days to complete before can now often be completed in minutes online.

A holistic concept of fintech

Put simply, financial services companies large and small, young and entrenched, would be wise to start thinking of fintech in broader, more holistic terms.

Yes, there are markets within financial services for which the greatest fintech opportunities require significant technology innovation, but the biggest fintech success stories aren’t just the result of technology innovation. Instead, they the product of technological innovation merged with customer experience innovation that delivers meaningful, superior experiences to consumers.

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