Fintech vs. Wealthtech  • Windmill

Fintech vs. Wealthtech 

Sundus Ghani
  • WealthTech

While Fintech and Wealthtech may seem like two fruits from the same tree, they do indeed have their differences. Fintech combines finance and technology, Wealthtech aims to offer an alternate solution to conventional wealth management firms by automating wealth management and investment services for users. It is a subsection of Fintech.

Fintech has become one of the most rapidly growing industries globally; with an estimated annual growth rate above 25 percent in 2022 alone, the industry is predicted to be worth above $310 billion. On the other hand, the wealth tech industry is expected to be worth $137.44 million in 2028. Both industries are increasing at their own pace and have seen new advancements over the years

But what are the differences between Fintech and wealth tech? This blog will discuss just that.  

Fintech and wealth tech: Definitional differences 

Fintech connects finance with technology to transform the way consumers use, spend, and receive their money. In Fintech, specialized software and algorithms can be accessed via computers and smartphones. Today, Fintech comprises various sectors and industries like retail banking and investment management. Cryptocurrencies like bitcoin are also starting to be readily used.  

Wealth tech aims to offer digital solutions to improve personal and professional ways of managing and investing. It uses modern technologies like artificial intelligence and Big Data to offer other methods of wealth management other than the ones conventionally used. The goal is to make wealth management and investment options coherent and computerized. 

Fintech and Wealthtech verticals

Fintech and wealth tech comprise a range of verticals.  

Fintech companies are typically involved in:  
  1. Lending: This involves Fintech companies directly offering loans by evaluating the borrower’s creditworthiness. Loans can even be requested online.  
  2. Payments: Fintech companies allow people to make payments at cheaper rates. Modern technologies such as blockchain allow Fintech companies to offer customers better prices than banks.  
  3. International money transfers: Modern technologies simplify the process of international money transfers, and Fintechs are now providing customers with a cheaper alternative to sending money internationally. International money transfers can be done via peer-to-peer lending, cross-border payments and digital currencies. It has been found that banks and money transfer companies tend to charge about an eight percent fee for international money transfers.  
  4. Personal finance: This includes apps that provide budgeting advice to consumers.  Many even offer advice regarding retirement or investments. Mint is a Fintech that helps customers budget whereas companies like Level Money help customers with their savings. 
  5. Equity financing: Fintech companies belonging to this category make it simpler for businesses to raise capital by connecting start-ups with accredited investors. They also provide virtual fundraising (non-profit events online or those with online components) for potential investors as the entire process is carried out online.  
  6. Consumer banking: Fintech is disrupting consumer banking by offering prepaid debit cards to people who are unable to get credit cards. Companies in this category include Green Dot and Netspend.  
  7. Insurance: Fintech companies in this category offer individuals’ insurance who aren’t able to get it via other means.
Wealthtech verticals:  
  1. Robo-advisors: They create viable investment options via machine learning algorithms that are dependent on a users’ risk aversion profile and factors like age and income. Another variation of Robo-advisors is Robo-retirement companies. They help manage retirement savings.  
  2. Micro investment: These platforms enable users to invest limited amounts of money with zero commission fees. This increases their need to have bigger estates to gain profit. Not only do they make investments simple, but they are attainable as well. 
  3. Digital brokers: These make stock market data and opportunities accessible to people. eToro is a popular one.  
  4. Investment tools: These offer additional data to investors via digital channels.  
  5. Portfolio management: These platforms enable users and financial advisors to control their investment portfolios in an organized manner.  

This year, some Fintech trends include a rise of digital-only banks, artificial intelligence, and machine learning. Research by Business Insider Intelligence stated that 48 percent of banking representatives believed that blockchain technology would have a massive effect on banking in 2022. Research has also predicted open banking to generate $43.15 billion by 2026.  

Wealthtech trends for 2022, on the other hand, include an increase in tokenization, a rise in the number of Wealthtech start-up purchases, automated compliance management, and an increase in virtual reality when making managed investments. 

Conclusion

Fintech and Wealthtech are emerging industries that have immense value and potential in the technology world. Not only have they made our lives easier when it comes to managing and saving our finances, but they have also reduced the need for traditional banking services. While they may have their differences, both fields are moving towards a bright future and are constantly coming up with new innovations. 

Windmill Digital offers exceptional digital product design and strategy services. Our team is highly experienced and will make you stand out in the market. For more, please contact us.  

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