Fintech (financial technology) Industry is the method and application of implementing the latest technological tools and applications in the financial industry. It comprises of latest technological services in financial services; online lending platforms, mobile banking, robo advisors, digital payment services, blockchain, and cryptocurrencies. However, Fintech Companies are both start-ups and established companies that offer financial services to the company. Today, we’ll discuss the PESTLE analysis of Fintech Industry; it focuses on external environmental factors like; political, economic, social, technological, legal, and environmental factors.
Political Factors Impacting Fintech Industry
Some of the main political factors in the Fintech Industry PESTLE analysis are as follows;
I-Government Regulations
The government cybersecurity regulations are very strict for Fintech Companies. They focus on areas like cybersecurity, data security, data privacy, user encryption, security protocols like two-factor authentication, and smooth transactions. However, the goal of Fintech Companies is to ensure smooth global transactions and online remittance services to financial institutions and business clients.
Some of the top Fintech Companies are Wise, Plaid, Revolut, GoodLeap, Rapyd, Stripe, Brex, Chime, and Ant Group.
II-Trade Policies
Fintech Companies are operating their financial service business in various countries worldwide. The trade policies of different countries are variable due to international trade alliance agreements, foreign policy, and diplomatic relations. For instance, the US government is highly careful and cautious about the Chinese and Russian tech companies operating their business in the US. It is due to their long-standing conflicted relations with one another.
III-Tech Industry Standards
Along with government regulations, Fintech Companies need to comply with the international tech industry standards. They comprise of various areas; proptech and insurtech, asset management and capital management, credit and lending, remittances and transactions, cryptocurrencies and blockchain technology, and tech infrastructure requirements.
Economic Factors Affecting Fintech Industry
Some of the main economic factors in the Fintech Industry PESTLE analysis are as follows;
I-Economic Growth
The country’s economic and financial growth plays a key role in the growth of businesses and companies. When tech businesses and companies are growing and hiring employees, universities are offering tech courses, and financial institutions are investing in the latest technology. Overall, it creates an environment of growth and opportunities for the Fintech Companies to offer their financial applications and services to business clients.
II-Interest Rate
The country’s interest rate directly impacts the growth and investment of Fintech Companies and businesses. When the federal bank increases the interest rate, they encourage users and buyers to decrease their spending and deposit their money into the banks. As a result, the business loan interest rate increases, and it reduces the overall investment in businesses and companies. Fintech Companies should become aware of the interest rates of different countries.
III-Investment in Tech Infrastructure
The government and the private sector investment in the technology infrastructure plays a key role in the business growth of Fintech Companies. For instance, when technological tools and digital technology are not the priority of the government; they would increase taxes on tech services and tech companies. Banks, financial institutions, and private tech companies would keep using the old technology without the latest tech infrastructure availability.
Social Factors Impacting Fintech Industry
Some of the main social factors in the Fintech Industry PESTEL analysis are as follows;
I-Customer Attitude
The customer attitude and behavior towards the usage of products and services play a critical role in its success or failure. The consumer market has shown a great interest in digital financial applications and online transactions. They prefer managing and organizing their accounts and finances on their digital and tech devices. Fintech Companies should become familiar with the customer attitudes and behaviors of different markets.
II-Demographic Change
The Millennials and Generation-Z comprised a major portion of the global population and the consumer market. The change in the demographic of the target customer market would directly impact the business operations of Fintech Companies. However, they should become aware of the changing demography of the target customer market, which allows them to precisely target the right customer market.
III-Easy and Convenience
Fintech Companies offer a great variety of digital tools and web applications to customers. They allow them to perform their international transaction digitally, and integrate with multiple banks and financial institutions, various types of remittances, and other types of digital and online financial services.
Technological Factors Affecting Fintech Industry
Some of the main technological factors in the Fintech Industry PESTEL analysis are as follows;
I-Research and Development
Fintech Companies invest a significant amount of capital resources in research and development. It allows them to develop unique and innovative financial services and features relevant to the needs and demands of customers. However, the unique and innovative financial services and features would help the Fintech Companies to immediately attract the attention of the customer market and gain a competitive edge in the market.
II-Advanced Technology
Fintech Companies are investing a lot of resources in the latest advanced technology like AI, ML, data analytics, and others. It helps them to efficiently manage and organize customer user data, track their clicks and activities, and offer them customized and personalized services relevant to the needs and demands of customers.
III-Cybersecurity
Fintech Companies pay great heed to the cybersecurity system of their financial applications and services. It allows them to offer a seamless transaction experience to the customers and ensures them that their transactions are safe and sound. A strong firewall and cybersecurity system would help them to earn the trust and confidence of the targeted customer market.
Legal Factors Impacting the Fintech Industry
Some of the main legal factors in the Fintech Industry PESTEL analysis are as follows;
Regulatory Compliance
Fintech Companies should comply with the regulations of different countries. They comprise of data security systems, data privacy, cybersecurity, blockchain technology and digital currency, international transaction alliances, and others. However, regulatory compliance would help them to smoothly perform their financial transactions and operations without any disruption.
Environmental Factors Affecting Fintech Industry
Some of the main environmental factors in the Fintech Industry PESTEL analysis are as follows;
Sustainability Initiative
Fintech Companies consume a significant amount of energy and electricity to run their digital platforms and electronic devices. They need to make a strong commitment to environmental sustainability initiatives and take steps. However, they comprise investing in renewable sources of energy, organic plastic, and recycling of electronic waste to decrease the carbon impact.
Conclusion: Fintech Industry PESTLE Analysis |PESTEL Analysis of Fintech Industry |External Environmental Analysis of Fintech Industry | Strategic Analysis of Fintech Industry
After an in-depth study of the pestle analysis of Fintech Industry; we have realized that Fintech Companies hold a strong position in the international market. If you are learning about the Fintech Industry PESTLE analysis; then you should keep in mind the abovementioned external environmental factors like; political, economic, social, technological, legal, and environmental.
Ahsan Ali Shaw is an accomplished Business Writer, Analyst, and Public Speaker. Other than that, he’s a fun loving person.
