NASDAQ in 1971 is another step in the development of the National Market System for trading securities physically and also electronically Early example of today s Fintech was the introduction of the Bloomberg Terminal in 1984 At this period of time financial sector has entered deeply into the digital industry with computerized and atomized processed that were bringing benefits as well as introducing many different security risks Next level of development was marked with the Internet disruption Majority of the financial services were moved online in order to meet the customers online and by the beginning of the 21st century financial transactions has been fully digitized IT sector played very significant role in the banking and finance sector 2 1 3 Fintech 3 0 In many research papers the GFC of 2008 is mentioned to be the turning point of the growth of Fintech 3 0 The post crisis period has had major influence on many different factors such as public perception and human capital which furthermore triggered the innovative products in the financial sector and banking industry One very relevant reason for that was the lost trust in the banking system and it allowed many young startups to challenge the business models of the traditional banks and financial companies
This has led to introduction of new technological innovations that could replace completely the traditional financial services Retail services have been digitized through mobile payments robot advisors for wealth management crowdfunding as new way of capital raising etc Those technological startups are disrupting the whole industry by offering the same services with better efficiency speed and less expensive way Desai 2015 Based on the research of Arner and Barberis today s Fintech industry is characterized by new competition and diversity bringing both opportunities and risks that need to be carefully considered Arner et al 2016 Today the technology innovations are reshaping the financial worlds and the disruptive nature is forcing the incumbents to develop new value propositions in order to compete and to surviveAs it was stated in the report of Deloitte these changes are disruptive but they aren't sudden Neither are they random They re targeting the likeliest areas the ones where customers are restless and where light scalable technologies apply McWaters 2015 2 2 Fintech Verticals Almost 14 billion has been invested in fintech startups in the past year a nearly 46 year over year growth rate according to CB Insights The company's data shows a steady rise in fintech funding since 2010
The top categories include online lending payments cryptocurrency and personal financial management 2 2 1 Lending FinTech Lending Fintech companies include primarily peer to peer lending platforms and lending platforms using machine learning technologies and algorithms to assess creditworthiness KPMG 2016 Taken from FT com Lexicon P2P lending falls in the definition of social lending and is explained as direct transaction between a lender and a borrower without the intermediation of a financial institution It is part of the broad category of non traditional financing where funds for different purposes come from the public online crowdfunding Aveni 2015 The Lending Fintech offering P2P are organizing the whole process of screening the loan applicants evaluating the risk and providing the online marketplace for buying loans They have the role of loan originators there is no institutional intermediaries and the loans are often unsecured or use non traditional collaterals The credit risk is left on the side of the investor who depending on the online platform he can choose to invest in certain units by himself or there are predetermined loan pieces by the company In general Lending tech companies are online loan providers that allow borrowers and lenders investors to match on online platforms supported by developed technology which is the disruption in the normal lending transaction offered also by traditional banks
The advantages of this alternative way of lending money is the convenience coming from the online technology as well as accessibility for both borrowers and investors Furthermore they offer better efficiency and lower costs by charging interest rates based on the market value and some fee as commission for the P2P company Also some more developed P2P companies are investing additional data into the algorithms which additionally increases the accuracy of the interest rates It attracts especially borrowers who are creditworthy but have limited access to banks The current best known players are Zopa Funding Circle and RateSetter but there are also many other that are performing well Aveni 2015 According to industry trade body the Peer to Peer Finance Association the sector more than doubled in size in 2013 Jones 2014 In my opinion I think that the general audience has lost significantly the trust in the banks after the financial crisis and that forces them to be attracted by many other alternatives that will lead them higher returns or lower cost of borrowing Furthermore the very low interest rates currently on the market are not attractive enough to have as returns and that additionally makes it attractive However after the empirical analysis in this paper we can conclude what is the opinion of investors generally today based on the acquisition prices shocks and the IPO underpricing which according to me will be also influenced by the increased fear of low securitization by the online platforms
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