How Fintech is Shaping the Future of Banking?
The constant progress of financial technology (fintech) impacts several sectors. In essence, fintech uses software to help businesses, owners, and customers manage their financial processes.
Fintech is still in its infancy, but it is already influencing fundraising, investment, banking, and education. There is little doubt that the banks will experience the most significant impact.
While most consumers still prefer to do business with traditional banks, more and more people are open to the idea of using fintech companies for value-added services or even essential banking services. As this trend continues, traditional banks are forced to respond to these companies. Are FinTechs really their “enemies,” or could they find a mutually beneficial way to work together?
In this article, we explain how fintech is shaping the future of banking.
What is the future of banking?
The future of banking is uncertain, but we will certainly see some significant changes in the years to come. If traditional banking institutions are to survive and grow in the future, they will have to implement new technologies. This can include developing better mobile applications and using the solutions offered by fintech.
In short, Fintech gives banks the possibility of offering better services to their customers.
Experts say the bank’s future will be social and environmentally conscious, customer-centric, and data-driven. So, what will it look like?
Banks are likely to be forced to dwell on issues beyond them. Consumers broadly support businesses that show their support for the social issues they deem necessary, whether it’s taking action to become more environmentally friendly or tackling current social and economic problems.
A customer-centric bank understands and responds to the changing needs of its customers. Fintech is Shaping the Future of Banking. So, people want their banking operations to be fast, secure, and accessible. Listening to her clients’ wishes and engaging with them will help.
Banks that are data-driven will provide solutions to their customers based on the facts. Banks can use accurate data to provide the best possible solution for their customers, much like social networks use data to give everyone a personalized content feed.
Fintech is Shaping the Future of Banking; The importance of FinTech
FinTechs are jolting the traditional banking industry by offering new products and services that meet the unique demands of consumers. “User-friendly,” “real-time,” “accessible at all times,” and “value-added” are just some of the qualifiers used to describe these new services.
FinTechs are also highly agile and adapt quickly to changing consumer and market requirements. Adaptive in nature and focused on digital and customer-focused, FinTechs accelerate the time to market for new products and services when consumer expectations or market conditions suddenly change.
The COVID-19 pandemic is a perfect example. Most FinTechs had already embraced remote working and digital processes, allowing them to adapt to new market realities and emerging consumer needs quickly.
On the other hand, traditional banks have organizational agility limited by several factors, including monolithic legacy systems, a slow pace of innovation, and some obstacles related to future work. For example, many banks have faced significant challenges in their transition to telecommuting.
In addition, FinTechs are better able to reach younger generations. They have become an alternative for young consumers who cannot find a bank offering the services they are looking for on the channels that suit them best and generally prefer simple digital solutions to traditional and sophisticated banking products.
For all these reasons, FinTech is among the fastest-growing industries globally. New companies seem to be emerging daily, and their potential for sustained growth is exceptionally high.
Fintech is Shaping the Future of Banking their customer service and experience
The wants and needs of customers have forced the banking industry to seek quick and flexible solutions. Customers are moving towards financial solutions that offer a seamless experience, more accessible access to their information, and increased security.
Compared to traditional banking, fintech innovations will provide solutions that give consumers a better experience.
The global economy can make it difficult to interact with your bank. For example, if you are traveling to a location where your local bank is not, it may be difficult to withdraw money or process a transaction. And if you are working with someone from another country, the banks may limit your financial trades. Few banking systems allow customers to pay and receive payments from anyone in the world in a convenient way. Blockchain technology will enable users to interact with anyone with an internet connection and a cell phone.
Faster transactions of Fintech is Shaping the Future of Banking
The future of banking will be almost instantaneous. Consumers will no longer have to wait 24 to 48 hours for transactions to be recorded. Traditional financial institutions are limited by fixed hours of operation. So people wait for their checks to be deposited and wait even longer if banks are closed on a public holiday. The technology operates 24 hours a day, seven days a week, 365 days a year; the days of waiting are about to end.
People worldwide are concerned about the security of their personal information and the privacy of their online activity. Globally, confidence in online banking has increased, but people need reassurance that their identities and money are safe. The use of blockchain technology by Fintech has been helpful in this area. The use of blockchain to build financial tools offers an unparalleled level of security.
Fintech is Shaping the Future of Banking Gives Low-cost personal finance management
The tasks we previously needed a financial advisor are now supported by technology. Fintech enables people around the world to access financial solutions remotely. Instead of going to an office to open an investment account or a new savings account, you can do it right on your smartphone. And instead of withdrawing money to pay your friend, you can instantly send money to them.
We are seeing new financial management tools emerging that are easier to use and less expensive. People rarely need to walk into a bank or speak with a human. Almost everything we need to do can be done online.
Financial apps can quickly connect to a user’s bank accounts and help them create a budget, track spending, transfer money between accounts, and more. And many of these tools are completely free.
Robo-advisers offer investment advice based on data and algorithms. Instead of paying a financial advisor, clients can pay a fraction of the price for a very similar service. Today, the robot-advisor industry manages billions of dollars in assets and continues to increase. The average human financial advisor takes 1-2% of your portfolio, while the Robo-advisor takes 0.4-0.5%. Customer service provided by Robo-advisers is limited, but the savings and convenience seem to be worth it.
Exclusively online banks can lower their fees and offer better interest rates because they have fewer expenses. They pay employees fewer wages and avoid the costs of renting or maintaining buildings.
For traditional banks, this means they have to adapt. They have two options: reduce their expenses or offer only a human service.
Fintech is Shaping the Future of Banking some Challenges of it
FinTechs have several strings to their bow, but they also have some competitive shortcomings. First, traditional banks have a clear advantage in customer size, access to funds, regulatory knowledge, geographic reach, and brand reputation. Unlike FinTechs, they are well established, well known, and well perceived.
Second, many FinTechs are start-ups and have not perfected their business model. Many of them have still not reached profitability. To succeed in the marketplace, they must start by offering discounted banking services to eliminate competition and raise the price to ensure survival. Yet, the fiercest competitors often revise their prices downwards, making profitability challenging to achieve.
Finally, their limited scope and strategy focused solely on retail banking (excluding business, wholesale, and investment services) are also among their challenges. In addition, most FinTechs have already found the banking functions easiest to improve and are now wondering which direction to take.
Final thoughts on Fintech is Shaping the Future of Banking
Most financial analysts don’t expect to see the destruction of the banking system as we know it, but they are paying attention to the impacts of fintech.
Fintech will continue to impact the financial sector in the years to come. For many years, banks faced very little competition. They offered little or no variety in their solutions. Today, new fintech solutions force banks to compete, and they are required to implement innovations at the risk of falling into oblivion.
The good news is that there is no room for entrepreneurs in the banking market. New players will find their place if they manage to deliver a perfect customer experience by offering customers more freedom and more personalized solutions than ever before.