What is fintech? 6 main types of fintech and how they work | Plaid (2024)

Types of fintech and fintech products

Fintech covers a wide range of use cases across business-to-business (B2B), business-to-consumer (B2C), and peer-to-peer (P2P) markets. The following are just some examples of the types of fintech companies and products that are changing the financial services industry.

Fintech banks

One of the most central components of the financial system, banking services have been shaken up by the fintech industry. Things like account opening and funding as well as a reduction in fraudulent sign-ups are now quick and easy thanks to technology like Plaid’s own Auth and Identity Verification, respectively. In turn, neobanks like Varo offer flexible personal checking accounts, high-yield saving accounts, and even secured credit cards—all without the traditional fees that can hinder people from achieving their financial goals.

For more information on fintech banks (aka neobanks), check out our in-depth article on neobanks.

Digital payments

Cashless payments are on the rise. Since the onset of the pandemic, cashless payments have made huge jumps, with 41% of Americans saying all their payments in a week are digital, up from 29% in 2018. In tandem, payment apps and services have become more and more common. That’s because receiving payments via direct bank transfer is significantly less expensive than using credit cards, and getting users signed up and authenticated has become faster and easier.

In the United States, Plaid allows consumers to instantly connect their bank account to an app or service to carry out digital payments (Shift, for example, aims to take the hassle out of buying a used car) via the ACH network. On the B2B side, apps like Wave help businesses pay bills, do bookkeeping, and send payroll—also digitally and via ACH.

→ Looking to streamline payments for both ACH and real-time payment rails? Plaid Transfer authorizes customers, analyzes risk, and moves money with one single integration.

Personal financial management (PFM)

PFM apps help users consolidate financial information from various accounts into a single dashboard, making it easier to stay up-to-date with their finances. These services help people to manage, budget, and make sense of their money. Examples include Dave and Brigit.

Another leading PFM app, Copilot, helps its users build an accurate picture of their financial health and net worth. Watch the video below to see how Copilot uses Plaid to help its customers get a holistic view of their finances.

What is fintech? 6 main types of fintech and how they work | Plaid (2024)


What are the types of fintech? ›

What are the FinTech Types?
  • Blockchain and Cryptocurrency. ...
  • Insurance (InsurTech) ...
  • Regulatory (RegTech) ...
  • Payments (PayTech) ...
  • Trading (TradeTech) ...
  • Digital Banking. ...
  • Personal Finance Management (PFM)

What is fintech and how does it work? ›

FinTech simplifies financial transactions for consumers or businesses, making them more accessible and generally more affordable. It can also apply to companies and services utilizing AI, big data, and encrypted blockchain technology to facilitate highly secure transactions amongst an internal network.

What best define fintech? ›

Fintech, short for financial technology, is a term used to describe the integration of technology into a financial service or process, with the goal of enhancing or automating it.

How many fintech are there? ›

There are currently over 26,000 fintech startups worldwide.

What are the six fintech entities? ›

The six entities are — Bahwan Cybertek, Crediwatch Information Analytics, enStage Software (Wibmo), HSBC in collaboration with Wibmo, napID Cybersec and Trusting Social.

What are the 5 D's of fintech? ›

At its core, guiding this evolution are the 5 D's of fintech—Digitization, Disruption, Democratisation, Decentralization, and Data. This expansive exploration delves into the distinct eras of fintech and elucidates how these guiding principles have been instrumental at each juncture of its development.

Is PayPal a fintech? ›

In the world of fintech stocks, PayPal (PYPL) is among the top options to consider. Strong fundamentals and recent investments in smaller companies makes this fintech player much more resilient. The company's fraud prevention systems build user confidence and encourage transaction growth.

How do banks use fintech? ›

Banks provide fintechs with backend infrastructure, knowledge, compliance, and regulatory controls. Fintechs help banks access new markets, enhance and accelerate the rollout of digital offerings, and deliver a better, more customer-friendly overall experience.

How does fintech payment work? ›

There are many ways to use fintech, but in general terms, fintech works by digitally transferring money. How this money is transferred, and which parties are transferring the money and why, are the circ*mstances that dictate different types of fintech. One popular method is through mobile payments.

Is fintech good or bad? ›

Fintech startups are often the first movers in disruptive technologies, fashioned to address an unmet need or to introduce a novel product, positioning them at the forefront of these rapidly growing markets.

What is fintech in real life? ›

Fintechs are companies that rely primarily on technology and cloud services—and less so on physical locations—to provide financial services to customers.

Why do people use fintech? ›

Fintech offers banking services to people in remote communities. Mobile banking and digital payment platforms are bridging the gap for those far from bricks-and-mortar banks, offering essential services like money transfers, bill payments and savings accounts.

How do Fintechs make money? ›

Fintech companies are making money by using technology to offer financial services to consumers and businesses. They are able to offer these services at a lower cost than traditional financial institutions and are also able to reach a wider audience through the use of technology.

Who is the biggest fintech company? ›

Visa Paytech

Did you know facts about fintech? ›

The fintech industry is broken up into various sectors, and the top fintech companies provide a variety of different services. Sectors include digital payments, lending, insurance, banking, and more. According to the FDIC, the use of mobile banking continues to be the preferred banking method over going to the bank.

What are the 3 pillars of fintech? ›

Let's delve into the three pivotal pillars that constitute the backbone of this financial revolution.
  • Innovation: The Driving Force. At the heart of Fintech lies innovation, propelling the industry forward at an unprecedented pace. ...
  • Accessibility: Breaking Down Barriers. ...
  • Security: Safeguarding Trust in Transactions.
Jan 3, 2024

What are the segments of fintech? ›

Fintech segments
  • Insurtech.
  • Regtech.
  • Wealthtech.
  • Cybersecurity.
  • Blockchain/Crypto.

Is PayPal fintech? ›

PayPal now has 428 million active accounts worldwide, and it continues to experience increasing engagements in transactions per user. The company is well positioned to be a fintech leader, as it excels in providing solutions for online shops and e-commerce stores.

What category is fintech? ›

Financial technology (better known as fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. ​​​At its core, fintech is utilized to help companies, business owners, and consumers better manage their financial operations, processes, and lives.

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