How Fintech Is Changing The Financial Industry

by Michael Griffin Michael

Fintech is the disruption of traditional banking through the creation of digital platforms. As a result, new players in the financial space have gained market share and lured customers away from traditional institutions. However, some fintech often collaborates with traditional banks to diversify their products and further monetize their client base. There is always a way for fintech and traditional banking systems to co-exist. But here in this topic, we are about to see how fintech has almost usurped the traditional banking industry or is in the process of doing so.

1. It's Giving Small Businesses More Financial Flexibility

● There are several ways that fintech is giving small businesses more financial flexibility. Using data on market size and penetration of financial technology to measure lending activity is one way. Fintech companies are also aiming to expand their services beyond lending. In China, for example, marketplace lending is likely to have declined substantially after 2017, because of changes to the regulatory environment.

● One way that fintech can help small businesses is through real-time decision-making. In a traditional bank, it could take several days for a small business owner to close an account, but fintech companies are finding tech-enabled ways to do it smoother and faster.

● Fintech is also enabling alternative lenders to become an important source of financing for small businesses. They offer small loans for short periods of time and use electronic platforms to process requests. Small businesses can access these services at any time of the day and night. They also offer more flexible payment terms than traditional lenders.

● Fintech companies are able to acquire existing banks. SoFi, for example, purchased the Golden Pacific Community Bank in February for $22.3 million. The company hopes to obtain a bank charter and start offering loans against deposits. Similarly, Lending Club, which started out as a P2P lender, plans to be a fully-fledged bank by 2021.

● These fintech companies have added the advantage of accepting payments from the world over in an array of different currencies, Companies like Razorpay, and Palpal are prime examples. Payment solutions by Ecommpay is one such example of a payment service provider that accepts payments from any part of the world.

2. It's Disrupting Traditional Banking

● Banks have been slow to respond to the disruption of fintech, but alternative financial services are steadily eating into the Big Four's share of the consumer banking market. This disruption is helping to improve customer experience and efficiency, two key factors that consumers value. Fintech helps banks understand customers better through data analysis and metrics. It is vital for financial institutions to value customers and protect their data.

● Fintech companies can offer products for up to 10 times less than conventional banks. Unlike traditional banks, they do not require real estate and thousands of employees. Thus they are cheaper to operate meaning the consumers are thus handed the savings However, the legacy systems and regulatory framework of banks limit their ability to use new technologies. As a result, banks are slower to introduce new products and services to their customers. These factors are limiting their ability to compete with fintech.

● Fintech companies can identify customer needs and wants and develop new products that meet these needs. As a result, many traditional banks are beginning to collaborate with fintech companies in order to better serve their customers. These partnerships will help both companies to build consumer trust, improve digital solutions, and stay in tune with customers.

● Although fintech has only a small share of the world banking system, it is reshaping the financial industry. In fact, statistics show that consumers are increasingly choosing fintech products and services over traditional banking. One study shows that 64% of consumers already use fintech platforms. These innovative companies have a different way of doing business than traditional banks, but they are still trusted by consumers.

3. Its Empowering women

The use of fintech also improves access to financial services for women. Women are underrepresented in traditional financial systems, so fintech could increase the number of women with access to financial services. Women face higher barriers than men to access financial services, including cultural norms and financial literacy.

4. Increased Use Of Technology

● Using AI to measure growth metrics and annual credit scores, FinTech is also helping banks improve their customer-centered approach. The use of chatbots can also help businesses manage their expectations and costs. The chatbots also help banks automate costs and gather metrics that help predict future customer needs. These technologies are disrupting traditional banking in many ways.

● Fintech is using new technologies to make banking more efficient and accessible. The aim of fintech is to increase customer satisfaction and increase transparency. This is done by unbundling the traditional banking system and creating new markets. Fintech companies can offer everything from loans to investment advice to help people manage their finances. Fintech companies also use technology to lower costs and improve customer experience. They are tracking consumer spending and preparing custom-made investment systems that are more appealing to their consumers. One such example of a payment service provider is Ecommpay which has tailored the payment experiences to the customer's preference to exceed the customer expectation and expect more such innovation in the future.

The Caution!

● There is no doubt that fin-tech companies have taken the financial system by storm However, these advances can be harmful if they are not regulated appropriately. As with all fintech developments, new laws should be drafted to ensure that small fintech firms are subject to appropriate regulation. New laws should also ensure that they are not overly burdensome. While fintech is helping small businesses to gain more financial flexibility, it can also pose a risk to financial inclusion.

● The entry of large tech companies into the fintech space has also brought with it concerns about the future of the sector. While large tech companies may be able to compete with smaller ones, their lack of liquidity and balance sheet buffers can make them more vulnerable to a financial crisis. This could lead to a more concentrated and dominated fintech industry. This may result in tighter regulations and funding restrictions for smaller companies.

Conclusion

The growth of the fintech industry is an incredible one and they have largely benefitted the economy. But also these systems need to be checked and regulated for them to have healthy growth. Again they are very much dependent on AI and software for their work which is troubling as the economy and finance is a subject of emotion and trust that needs human touch and emotion to sustain. The future however seems plausible to be an integration of fintech companies with large banks for a sustainable economic future.