Fintech or Financial Technology has changed the financial landscape in the last few years. The Global Fintech Market size is expected to reach USD 332.5 billion by 2028 and may grow at a Compound Annual Growth Rate (CAGR) of 19.8%.
Fintech, as we understand, covers a wide range of financial services and the areas where they are most prevalent include lending and credit, wealth and brokerage and payments and transactions. It is also growing in blockchain, neo-banks and mortgages and disrupting traditional banking practices.
As per a report by the Bank for International Settlements, fintech innovations have potential benefits for all users of financial services.
The millennial population helped fintech become a disruptive force. They are highly demanding and expect personalised products and services. They also prefer to check for information online instead of physical visits.
This growth of fintech can be attributed to its services, making banking and finance more accessible and streamlined for users. Fintech uses automation to speed up processes, and applying for loans and mortgages can be done online without any human interaction. This is causing a shake-up for traditional players.
How will the future of banking be impacted?
Technologies such as blockchain, artificial intelligence and alternative lending are powerful forces for financial service platforms. They have changed the way banking is done. A vast majority of banking organizations are integrating digital services to compete with fully digital startups.
The development of virtual voice assistants and chatbots has enhanced customer satisfaction and experience like never before. They replace the need for skilled customer care professionals to be available 24X7. Overall, it has led to a smoother banking experience for everyone.
Why fintech and banks should work together?
Customer demands from financial services have evolved and so have people’s banking behaviours. Here’s how:
● Technology gap: By using technologies to create customer-focused products and services, fintech has an upper hand. Banks can use fintech to build API or extend their stack with the bank’s existing architecture.
● Customer satisfaction: The overall customer experience that a fintech offers is something that banks can leverage. Fintechs are faster, more efficient, and secure with lower costs. Their mantra is to earn trust through better customer service and referral-based client acquisition. This will help banks in improving their services.
● Better branding: Again, with modern tools like gamification, fintech apps can make tasks such as budgeting more exciting for customers. They are refreshing the branding of legacy services which is something banks need.
● Use of mobile devices: The usage of mobile devices and the internet has increased a lot. Any business that wants to connect with its customers provides mobile-friendly products. They can offer speedier transactions and real-time information.
● Better services: The pandemic shifted everything online, and now customers consider online services more convenient than physical visits to banks. Time constraint is no longer an issue. Transactions can be done anytime without hassle. One can track the status of their transactions and even find lenders easily for a short-term loan or a payday loan. Fintech also adds efficiency to the entire banking process. Automation can offer a higher level of specialisation, and the service quality is bound to improve.
● Focus on security: Fintech focuses on making banking safe for everyone and takes measures to protect customers’ financial information. From adopting AI for fraud detection to using advanced blockchain systems, RegTech, multi-cloud data storage and IoT for smarter security solutions, there are multiple security enablers available.
Fintech can perfectly complement traditional banking by using data more intelligently and offering data analysis. Neo-banking is another force that is changing the conventional ways of banking. They are digital banks that conduct transactions entirely online. Therefore Neo-banks are certainly on a rise.
For banks, the best strategy is to expand their branches and integrate with the best fintech. And for fintech, an ideal strategy is to build its product and expand its market share.
Fintech – a major force in economic contribution
This is the era of fintech. Banks need to adapt to digital trends as soon as they can. There is a growing expectation from product-based models to customer-based models, and it will continue to remain like this. By finding the right balance between partnerships and investments, traditional banks can leverage innovative solutions and fulfill the ever-changing needs of their users.
Attributed to Satyajit Kanekar, Co-founder & CEO of Mobileware Technologies.