The banking industry has seen a major shift in recent years as new fintech companies have emerged, offering innovative technologies and services that are changing how banks do business. Fintech is not only transforming the financial landscape and posing a threat to traditional banks that must adapt or risk being left behind but by leveraging the advantages of fintech, banks can create new opportunities for growth and stay ahead of the curve.
What is Fintech?
The term finTech or Financial Technology is derived from two words: financial services and digital technology. In simple words, finTech is the innovative use of technology in the formation and delivery of financial services.FinTech encourages the use of digital technology in startups so that they can come up with innovative products and services, such as mobile payments, alternative finance, online banking, big data, Robo advisors, peer-to-peer lending, crowdfunding, and overall financial management. Additionally, in today’s digital era, customers are not keen to go for services provided by traditional banking systems. Instead, they prefer services that are quick and safe. Due to this, FinTech is gaining popularity and is disrupting the banking industry.
How FinTech is changing the banking and financial industry?
- E-Wallets: It is one of the top fintech solutions in the financial industry. The immense growth of E-wallets is an indicator of the rise of FinTech services. E-wallets are positively impacting the banking industry by being the major source of digital payments as the users need to add their bank account details to the wallet to add funds to it.
- Smart Chip Technology– One of the most noticeable impacts of smart chip technology on the banking industry is that it has increased the security of payment transactions. Hence, there has been a significant reduction in card fraud and has increased consumer confidence in electronic payments.
- Mobile Banking– A mobile banking app provides quick access to funds, and the user can perform several banking functions such as quick bill payments, check deposits, account balances, statements, and many more.
Fintech solutions have enabled banks and traditional financial institutions to remain competitive in the digital world. Banks can improve efficiency, reduce costs, and create better customer experiences by leveraging these solutions. Fintech companies also provide access to new technologies that allow banks to gain valuable customer insights and design better products and services.
Why Fintech is so popular?
Fintech is making banking and financial services more streamlined and accessible. Through the use of technology, users can take advantage of automation to speed up processes that previously a human would have managed. Whilst some financial services still use a mix of both advisors and algorithms, other transactions such as applying for a mortgage or a loan can now be done quickly and conveniently online, without any human interaction at all.
Why Fintech is a threat to banks?
Fintech threatens banks because the technology is disrupting traditional banking models. Fintech companies are providing new solutions that allow customers to access services faster, more conveniently, and cheaper than traditional banks can offer. In addition, fintech companies can provide personalized services tailored to customer needs. The result is that banks are facing increased pressure from fintech companies, with this in mind, banks need to invest in fintech solutions and adopt digital strategies that will enable them to remain competitive and thrive in a changing landscape.
Why Fintech and Banks Should Work Collaboratively?
Fintech and banking services are interlinked with each other. Fintech can integrate banking services with its advanced innovations, making them more accessible and useful for the general population. Now we must understand why fintech and banks should work together:
- Increase in the use of smartphones
- Almost every service is available online
- Better Branding
- Enhanced Customer Satisfaction
Today FinTech is bigger and more successful than ever due to its seamless services. Fintech is disrupting traditional financial institution models in significant ways, challenging banks to adapt to a new reality. Banks must embrace digital technology, improve customer experience, and innovate their business models to stay competitive. Investing in fintech solutions and adopting digital strategies is essential for banks to remain competitive and thrive in a changing landscape.