FinTech is reshaping the world of finance by providing the more efficient and secure financial services that consist of financial activities, that were only provided by the traditional financial institutions such as banks, insurance, or investment corporation. Smart Contracts is the feature of Blockchain technology that works same as the real contracts but it operates digitally. Like blockchain technology itself, smart contracts also have potential to change the way we deal with finance if used or applied in the development of financial services.
FinTech is defined as innovating use of technology in design and development of financial services. FinTech is the new emerging financial technology which uses technology as the tool to leverage the experience of finance and providing customers the services that are user-friendly. It aims to compete with traditional financial institutions such as banks in improving or completely replacing the methods of finance in order to fill the gap of what customer is demanding and what traditional institutions are providing. This innovative use of technology in finance has made the FinTech industry so popular that there are now number of financial services being used at large scale as alternative to those traditional services. Most popular services include Amazon, Taobao, Paypal, Kickstarter, Alipay, Applypay, Bitcoin (along with other cryptocurrencies), Facebook, WeChat etc.
As mentioned above, Smart Contract is same as the real contract, but the only difference is that it is digital. It is basically a tiny computer program or software that contains the piece of code which is self-executing, and it runs on the blockchain such as Ethereum which is decentralized distributed network, maintained by the thousands of individuals.
In other words, Smart Contract works on If-This-Then-That logics, means it works on conditions or events either outside, a human intervention, or an internal event that is generated when any condition becomes true.
Smart Contracts can be applied in banking, as a part of banking service which will ensure that funds flow between parties directly or seamlessly.
Insurers can use smart contracts which will respond to an event such as an accident and perform accordingly.
Smart Contracts are also being used in crowdfunding platforms. For example, Kickstarter is the financial service (the example of FinTech) which is the online public-funding platform that provides funds to the people. But it is executed by the single authority or organization. Now, Smart Contract can enhance this experience of FinTech in a more effective way if applied. Suppose, a crowdfunding platform runs on Smart Contract which will not be executed by any single authority like Kickstarter but it will be self-executed and it will work on conditions. This will increase a trust of people and security because once a smart contract is written and executed it cannot be changed, means it is immutable.