Everywhere you go, there’s fintech! It’s not just cryptocurrency and blockchain technology. It’s every debit/credit card swipe, hitting that checkout button, tracking your spending, and more! Fintechs are here for us in many ways, but how do they help themselves? How do they make money?
1. Advertising & Marketing
The obvious and mundane answer is advertising. As the old saying goes “you have to spend money to make money.” Fintech is no different, you have to make yourself known until you no longer need to. Any company could do an easy, straightforward ad campaign on Facebook, Twitter, or any social media platform! But, fintechs – especially blockchain companies – are favoring initial coin offerings (ICOs) to raise funds. And of course, something that big needs advertising and marketing! This type of marketing can be very effective as it allows a company to reach out to potential investors on a global scale.
2. Subscription fees
Just like Netflix, Spotify, and Disney+, fintechs charge a subscription fee to make money. This is a proved and trusted business model that has been around for ages! It’s also known as SaaS AKA software-as-a-service. Companies using this model charge monthly or yearly subscription fees to their customers on a recurring basis in order for them to use their products. This type of model is very popular among personal financial management apps. You know the one that reminds you to make a budget and makes you feel guilty at every month’s review.
3. Payment gateway fees
Like we said before, payment gateway is a complex process but it appears like a 5-second process when you checkout! So let’s say you buy something from your favorite local bookstore, and your whole payment is then transferred to several parties; the bookstore, online payment providers, the issuing bank, and the card network (Visa or Mastercard).
Why trust a human when you can trust an AI with little to no error margin? There’re many reasons for that, but Robo-advisors have become popular and trustworthy among investors. With AI and machine learning, Robo-advisors can develop algorithms to manage portfolios efficiently. Companies like Moneyfarm, Betterment, and Robinhood, give their customers access to these features.
Robo-advisors also charge way less than a wealth management firm. But, Robo-insurance counseling users pay a fee that ranges from 10% to 20% of their financial assets, even though they are not required to pay a high premium for the service.