How to distinguish Fintech from Techfin?
In 2019, Fintech is not a new definition, and most people have some understanding of it. One way or another, people are able to decipher the abbreviation and put together “finance” and “technology”. Thus, it makes the definition far less complicated and more understandable even for inexperienced users, if we are talking about technology and finance sectors. But if “Fintech” causes no trouble for users, the fancy word “Techfin” seems to be a real pitfall. What is it? Are they the same, and if not, what is the crucial difference between them? How to distinguish these two definitions? So many questions…
PaySpace Magazine has figured out what are Fintech and Techfin, and offers you to consider how they differ.
What is the difference between Fintech and Techfin?
Actually, it is not that complicated. The primary difference between Fintесh and Tесhfin is to found in the construction of the words (in the order of root and prefix, to be accurate). This, in its order, defines the origin of the underlying organization. Normally, Fintech refers to a financial institution that is eager to find a better way of delivering financial services. Thus, financial companies look for technology to improve their service and customer experience.
A traditional bank that offers mobile banking service is a good example of Fintech. Nevertheless, most often, Fintech is about non-traditional financial institutions such as PayPal, Zеllе, and Vеnmо in the United States, or online-only Starling Bank, Mоnzо and Rеvоlut in the United Kingdom.
On the other hand, Techfin refers to a technology firm that wants to deliver financial products on the basis of existing tech solutions. Classic examples of Techfin institutions include Google, Amazon, Fаcеbook and Apple (GAFA) in the United States, and Bаidu, Аlibаbа, and Tеnсеnt (BAT) in China.
Jack Ma, a co-founder and executive chairman of Alibaba Group, has described the difference between Fintech and Techfin in an interesting way:
The success factor for both Fintech and Techfin lies typically in the ability to ensure large financial institutions:
And in summation, the difference in the approaches defines this thin line between Fintech and Techfin:
After all, it is not about the differences between (almost) similar definitions. It is about the ability of tech and finance companies to collect and analyze massive data sets, learn from the insights to improve personalization and digital engagement in real-time, and expand offerings in response to consumer needs. The distinction between words can become blurred, while the real advanced solutions will define the real leaders of the market.
Let’s consider how to distinguish Fintech from Techfin in practice:
- Plaid Technologies
This US startup was launched in 2013 with the aim to “democratize financial services through technology”. The firm has developed a toolkit, which protects interactions and data exchanges between customers, banks and third-party applications.
The description helps us unambiguously define that this startup is Fintech, since it is a financial service company that tries to improve the service through technology.
Alipay is an online payments platform, developed by tech giant Alibaba.
In March 2019, Barclays and Alipay announced their partnership. Aliрау will now be available with several merchants across the United Kingdom, and allow for a seamless payment experience for half a million Chinese residents, tourists and students in the UK.
That’s the classic case of Techfin, because Alipay is a subsidiary of Alibaba Group, which is a tech company. Thus, the technology firm has found a way to deliver a seamless instant payment option.
This Boston-based Fintech startup offers four products: Circle Invest, which simplifies investing in cryptocurrencies for the average user; Circle Pay, a peer-to-peer payment platform; Circle Trade, a cryptocurrency trading platform that processes $2bn worth of crypto payments per month; and Poloneix, one of the world’s largest cryptocurrency exchanges.
This firm also uses technology to deliver financial (cryptocurrency) service. Therefore, it is a Fintech company.
- Apple Pay
Apple Pay is a mobile payment and digital wallet system developed by Apple.
On 25 March 2019, the tech company announced that the Apple Card would be available in summer 2019. Actually, it is a payment card, which cooperates with Goldman Sachs and MasterCard.
This is another Techfin situation. In this case, Apple (being a technology firm) developed its ecosystem and managed to launch its payment system.