The way we manage our money has changed so much in recent years. Powered by the disruptive force of the $226 billion-worth FinTech industry, we can say that this isn’t merely a fad. The sector represents a development in the way financial services are conceived, delivered, and accessed.
This article will explore the multifaceted role FinTech plays in shaping modern banking. We’ll discuss its augmenting efficiency and convenience for both banks and consumers. By the time you’ve finished reading this, you’ll have a better understanding of how it will continue to influence our financial landscape.
A Simpler Look at Financial Tech
FinTech, short for financial technology, might sound complicated – but it’s really just about using technology to make money matters easier. Look at it like a toolbox filled with clever gadgets designed to improve how we handle our finances. Here are some of the fields it covers:
- Mobile Apps: CashApp and Apple Pay are some examples of FinTech solutions that let you pay friends instantly. You can shop at stores with a tap and even settle bills – all from your smartphone.
- Robo-Advisor:There are several platforms that will allow you to invest with the help of AI. You can also automate your planning and portfolio management as too.
- Borrowing and Lending: Need a loan but hate bank hassles? Peer-to-peer (P2P) lending platforms connect you directly with lenders. It’s an easier borrowing process and can potentially provide better deals for both sides.
- Blockchain: You might have heard of Bitcoin, but blockchain is the tech behind it. These coins are backed by sophisticated ledgers to facilitate and secure transactions.
- InsurTech: Used for faster claims processing, better fraud detection, and even personalized insurance plans that fit your needs.
These are just a handful of the distinct areas in the financial sector that benefited from modern technology. Innovations like Digital Wallets, Payment Gateways, and RPAs, all fall under the same ecosystem. Let’s take a look at their impact.
5 Major Ways FinTech’s Impacting Modern Banking
FinTech is not just virtual banking anymore. It’s driving changes within the world’s banking infrastructure. How? Here are the top reasons FinTech is changing modern banking:
Open Banking
Open Banking is where FinTech can potentially make a lot of money. Why? It’s a chance for the FinTech industry to assert its control over income-generating domains that were once the sole preserve of banks.
These firms have affected competitive rates, quality service, and agile product design to drive customer experience. Successful providers have been able to disrupt and challenge traditional offerings from major players.
Breaking Geographical Restrictions
For the past years, the industry’s geographical boundaries have been changing. They’ve broken down the entry barriers into many traditionally underserved regions. It is easy to see how this is possible.
Many organizations can minimize costs regardless of geographic challenges. Older systems do have a legacy of providing stiff competition to smaller start-ups. Because they’re often bound by outdated structures, traditional institutions have a slim chance of keeping pace.
Banking Sans Brick-And-Mortar
Modern banking is shifting increasingly online. It is possible to subscribe to new services, gather loans, and carry out investments without any physical infrastructure investment. The rise of prepaid banking services using smart, highly secure, and easy-to-use platforms is a testament to this. Say you want to create an international bank account – a simple click or tap on your phone is all you need to do.
Enhanced Consumer Experience
Consumers expect to access services and products that make their lives easier. These companies cater to this demand quite perfectly. They’re constantly diversifying services to cover more areas of banking and finance.
It’s not just about processing transactions. Firms invest in data-driven technologies like AI, machine learning, and robotics, all to make innovative services like robo-advisors and chatbots.
Reduced Costs and Increased Efficiency
The main reason FinTech started was to eliminate cumbersome procedures and reduce the cost of services. Similar to any other sector, the first thing they applied their technology to was internally. Since then, it has been making processes faster and saving companies millions in terms of operational costs.
With the arrival of API and cloud technology, traditional banking providers are being supplemented by efficient, software-driven networks. It reduces the amount of work that must be done manually.
This significantly reduces human error during transactions like approvals and signoffs. These benefits improve efficiency company-wide and reduce costs, bringing down the cost to the consumer, and driving industry growth.
Bottom Line
It is not hard to see why the FinTech sector is projected to grow at an unprecedented pace in the coming years. Given its impact on banks worldwide, it’s changing the way financial firms do business while influencing consumer behavior. This technology is expected to continue growing and developing, with the aim of making it easier for institutions and us to access and manage our money.