How Fintech is reshaping the future of traditional banking

🔊 Listen to this article

Fintech or Financial Technology has changed the financial landscape in recent years. The global Fintech market is expected to reach USD 332.5 billion by 2028 and can grow at a compound annual growth rate (CAGR) of 19.8%.

Fintech, as we understand it, covers a wide range of financial services and the areas where it is most prevalent include lending and credit, wealth and brokerage and payments and transactions. It is also growing in blockchain, neo-banking and mortgages and is disrupting traditional banking practices.

According to 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 very demanding and expect personalized products and services. They also prefer to look for information online rather than physical visits.

Read also | New technological advances in the Fintech industry

This growth of fintech can be attributed to their 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 human interaction. This creates a jolt for traditional players.

How will future banking be affected?

Technologies such as blockchain, artificial intelligence and alternative lending are powerful forces for financial services platforms. They have changed the way banking is done. A large majority of banking organizations are integrating digital services to compete with all-digital startups.

The development of virtual voice assistants and chatbots has improved customer satisfaction and experience like never before. They replace the need for skilled customer service agents to be available 24×7. Overall, it has led to a smoother banking experience for everyone.

Why should fintech and banks work together?
Customer demands from financial services have evolved, and so has people’s banking behaviour. This is how:

● Technology gap: By using technologies to create customer-focused products and services, fintech has an upper hand. Banks can use fintech to build APIs or extend the stack with the bank’s existing architecture.

● Customer satisfaction: The overall customer experience that a fintech offers is something that banks can exploit. Fintechs are faster, more efficient and secure with lower costs. Their mantra is to earn trust through better customer service and referral based customer acquisition. This will help the banks to improve their services.

● Better branding: Again, with modern tools like gamification, fintech apps can make tasks like budgeting more exciting for customers. They refresh the branding of older services, which the banks need.

● Use of mobile devices: The use of mobile devices and the internet has increased a lot. Any business that wants to get in touch with its customers offers mobile-friendly products. They can offer faster transactions and real-time information.

Read also | “Indian banks need to start operationalizing threat intelligence to improve preparedness for security operations”

● Better services: The pandemic moved everything online, and now customers consider online services more convenient than physical visits to banks. Time constraints are no longer a problem. Transactions can be made at any time without any problems. One can track the status of their transactions and even easily find lenders for a short term loan or a payday loan. Fintech also brings efficiency to the entire banking process. Automation can offer a higher level of specialization and the quality of service is guaranteed 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 analytics. Neo-banking is another force that is changing the conventional ways of banking. They are digital banks that carry out transactions entirely online. Therefore, Neo banks are certainly on the 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 their product and expand their market share.

Fintech – an important force in economic contribution
This is the fintech era. Banks must 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 be so. By finding the right balance between partnerships and investments, traditional banks can leverage innovative solutions and meet the ever-changing needs of users.

Attributed Satyajit Kanekarco-founder and CEO of Mobileware Technologies.