FinTech service — Definition Explained Simply | Examples & Role
A FinTech service (FinTech company) is a digital financial service or application based on new technologies that offers banking or similar financial services through innovative solutions (for example, online payments, mobile banking, or P2P lending).
What is a FinTech service
A FinTech service (from "financial technology service") is a financial offering delivered through modern digital technologies that introduces new models, processes, or channels in the financial sector. It may appear as a mobile app, an online service, or a platform providing payment processing, lending, investment management, or other banking-related functions.
Features and technologies
Key characteristics of FinTech services include the use of cloud computing, APIs (Application Programming Interfaces), big data analytics, artificial intelligence (AI), blockchain, and digital platforms. According to the Deutsche Bundesbank, a FinTech company is a firm offering innovative, technology-based applications in the financial sector.
FinTech in banking and finance
FinTech services can replace, complement, or integrate with traditional banking services — for example, online account management, mobile payments, P2P-lending platforms, robo-advisors, or digital insurance (InsurTech). These services often emerge outside the traditional banking system or in cooperation with established financial institutions.
Advantages and risks
Advantages: improved convenience for customers, lower costs, faster processes, 24/7 availability, and adaptability to new devices. Risks: cybersecurity threats, data protection issues, regulatory uncertainty, operational risks, and potential effects on financial stability (as noted by the Deutsche Bundesbank).
Regulation and supervision
The term FinTech has no precise legal definition in Germany. FinTech services fall under the regulation of financial, payment, or banking services when they perform such functions. Supervision is carried out by the Federal Financial Supervisory Authority (BaFin) and the Deutsche Bundesbank, which monitor FinTech activities and assess their impact on the financial market.