FinTech Business Models: The Elixir Of Modern Finance Industry

March 3, 2021

What Is FinTech?

Fintech stands for financial technology and it depicts new inventions that are aimed at improving the delivery of financial services. In most cases, Fintech solutions are provided by developing and interpreting complex algorithms, cloud computing, and software integration.

FinTech solutions can be aimed at both the private customers and established businesses ranging from banks over insurances up to regular business such as clothing stores, eCommerce stores, or cafes.

Fintech conglomerates have become an integral part of our daily lives. There is an increase in the numbers of traditional financial providers and these have decided to partner up with the newly established technology solutions. From opening accounts to insurance underwriting and credit profiling, FinTech startups are transforming various services of traditional banks and flipping the conventional business models in the financial industry. Several FinTech Business models are depending on the way they are fused into the banking activities and core operations. Let’s dive right into the top 14 innovative Fintech Business Models

Top 14 FinTech Business Models

There are several Fintech business models that are disrupting the financial industry.Let’s look at 14 innovative FinTech business models that are leading the path of disruption.

Alternative Credit Scoring

There is a huge rise in the number of self-employed individuals who have a steady income. These individuals do not pass the conventional bank loan screenings due to the strict and outdated credit scoring criteria. Alternative Credit Scoring is implementing a new approach by considering alternative data points such as percentile scoring and signals amongst similar borrower groups. These qualitative factors combined with self-learning algorithms and machine learning can lead to better decisions over time. Alternative credit scoring can determine negative profiles based on social presence before the loan disbursement to avoid loan recovery issues.

Alternative Insurance Underwriting

In today’s world, individuals are given the same life insurance premium. Individuals are completely different with different health habits with different risk premiums. This leads to faulty premium calculations due to averaging out as the risk premiums do not account for the factors that are not quantifiable.

With alternative insurance underwriting, the Fintech companies are creating dynamic risk premium computing mechanisms with alternative data points such as social signals, lifestyle, and medical history. Just like the alternative credit scoring approach, this approach helps the FinTech companies in determining whether or not to offer insurance and other alternative payment options.

Transaction Delivery

Data is the new life force and managing it can give better insights and information into the needs and wants of the customers. FinTech companies are creating free products in the wake of transaction delivery. These companies stretch their business pillars to manage the expense gaps. To achieve this, the companies collect the data and share the same with the rest of the group to map the potential of the customers. This is done to pay premiums, buy mutual funds and invest in real estate.

Peer-to-peer Lending

P2P or Peer-to-peer lending is another Fintech Business Model. P2P lending deals with an individual borrowing an amount of money from another. Similarly, P2B is a situation when a business borrows money from one or multiple individuals. These lending models make it easier for investors to get better returns than those offered in debt markets by giving their money to pre-approved and vetted borrowers.

Small Ticket Loans

Different lenders and banks do not underwrite smaller ticket loans due to the low margins and high investment costs involved in setting and recovering the loans. FinTech companies in the market deliver great impulses by purchasing the ‘buy now and pay later’ mechanisms and one-click buttons on the eCommerce websites. This enables the customers to buy quickly without having to enter any credit card authentication form. By sharing the customers’ data with the algorithms determined the customers’ demographics and this effectively assists the marketing efforts.

Payment Gateways

Payment gateways are unique platforms that enable online shoppers to pay for a product on the merchant’s website through a secure portal. Typically the traditional banks charge a hefty fee to handle the transactions from all these methods. FinTech companies are integrating all these payment methods into convenient applications that the online merchants can easily afford and integrate on their websites.

Digital Wallets

Digital Wallets are the perfect combination between a bank account and a payment gateway. With this FinTech business model, customers can get a certain amount of virtual money in their digital wallets and can use this virtual amount to make online or offline purchases with merchants who accept digital payments. It typically helps the customers by making payments for a small fee which is charged to the businesses in the form of a discount rate.

This business model offers convenience to the users in making payments for a small fee that is charged to businesses in the form of a merchant discount rate. The typical end-users of wallets are businesses that sell either their physical products or services in the stores to the end-users.

Asset Management

The new FinTech companies are enabling investors to trade for free in exchange for their data. They forward this data to the high-ticket traders who can influence the price of the asset. Even though the investor might pay a slightly heavy price for their assets, the difference between the amount they save from trading fees.

Digital banking

Some banks offer no-frills individual and bank accounts through a complete digital infrastructure. This business model is almost identical to that of a bank with no physical branches. This results in the elimination of overheads, savings in manpower, and real estate so that the customers can greatly benefit from the reduced rates.

Digital insurance

The FinTech companies are operating in the insurance industry and are taking their traditional services to the digital world. These companies offer life and health insurance with the best underwriting practices. Their premiums can be available at variable prices and rates depending on the customer and offer inexpensive coverage as compared to the traditional insurance companies. Such insurances can create business possibilities when mixed with proper marketing strategies.


NeoBanking is a unique FinTech model that creates digital platforms. These banks are faster, efficient, cost-effective, and adaptable to market scenarios. Different banks have different purposes. Some can manage online bank accounts and others can use top-notch tools to save budgets. Some Neo-Banks deal with accounting operations to automate finance and credit operations.

Wealth tech

Wealth tech companies are transferring the small retail investors into dominant wealth management to reach out to the mass segment with the small value systematic investment plans. Wealth-tech implements technologies such as gamification of processes, technology-driven wealth management, robotic-advisory, portfolio management tools, and sentiment analysis.

API-based Bank-as-a-service Platform

The API-based Bank-as-a-service platform is a back-end operation that hosts independent Fintech startups and integrates them with any traditional banks. With the help of such platforms, financial institutions can effectively start their products and bring them to different and new markets. This allows the non-banking institutions to easily launch additional financial products and scale the market.

PoS or POP

The PoS or PoP (Point Of Purchase) is the time and place for completing a retail transaction in real-time. A digital retail PoS system includes a POS terminal that can process credit cards and implement payments through a swipe. The companies that have a Point Of Sale Fin Tech model are service providers that maintain both PoS hardware and software solutions.

How do the tech companies implement FinTech Business Models? How exactly do these companies do it?

FinTech startups have always focused on growth instead of profit. This was a big move to grow as much as possible and effectively scale the market. But after some years, these startups started to focus on profits. Now, these FinTech conglomerates own a huge market segment, biggest customer base and this has made it easy to multifold the profits.

How Are The Tech Companies Using FinTech Business Models?

With the advent in the market and adoption of cashless payments, eCommerce giants have rolled out different FinTech business models. With advancements, the customers are offered ‘buy now and pay later’ options. Many eCommerce portals have introduced insurance on mobile phones under its complete Mobile Protection program. Apart from this, these eCommerce conglomerates have also come up with digital wallet compliance.

What has caused this disruption?

Modern businesses need modern and resilient solutions and the FinTech Business models are making things easy for the challenger banks and FinTech startups.

Advantages Of FinTech Business Models

Various FinTech Business Models have different approaches and shapes. Therefore the different Fintech Models can have different advantages in terms of company and the customers buying into it. Below are some advantages of FinTech Business Models.

Huge & Loyal Customer Base

Customers trust their banks for keeping their assets and finances safe, borrowing money for life-changing events such as huge purchases, or how to invest in the existing mutual funds. While customer acquisition is not easy, banks spend billions every year on marketing efforts and activities, customers tend to grow loyal to their banks over the course of time and membership of their accounts.

Financially Profitable

The financial industry is one of the evergreen industries in the world. This industry offers several great opportunities to generate significant amounts of revenue. Startups in the financial space are nicely funded and highest valued. This profitability is changing the fate of FinTech Business and the companies that are adapting to the constantly evolving market.

Speed & Resilience

Many traditional banks are built on outdated legacy systems. This outdated system makes it extremely difficult for them to respond to the changing customer requirements in a fast-paced environment. The NeoBanks are using it to their advantage and are snatching away customers from well-established traditional banks. The incumbents have also joined hands with the challenger banks and rendering their expertise in banking license and regulatory practices.

The Future Of FinTech Business Models: Banking Redefined

The FinTech companies have been able to show resilience and evolve at a rapid pace as these are not bound by IT legacy or any type of governance. This flexibility to evolve freely has allowed them to churn out new products and services at an increased rate. FinTech is getting more popular and showing customer acquisition at a rapid pace, but one cannot unsee the fact that regulatory crackdowns are inevitable as cybercrime is evolving too and this covets customers’ sensitive data.

The FinTech market heavily relies on applications that can access the users’ financial profiles and information to perform a variety of transactions in real-time. Banks need to ensure that a robust application security infrastructure is deployed to protect the users’ valuable data. This must include a web application that is firewalled with the current threat intelligence to identify the patch vulnerabilities and mitigate the unknown issues.

Most of the data on the cloud is protected differently than in traditional data centers. Blockchain is getting popular in the financial industry as the number of FinTech companies is increasing every day. This secure technology implements point solutions and amplify the data movement with decreased visibility across distributed environments. Apart from detection and prevention, this security is dynamically adaptable and can effectively grow alongside Cloud infrastructures. The ability to evolve, adapt to changing environments, and deploy multiple layer security enables the FinTech companies and challenger banks to have a huge scope of growth in the future.


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