Fintech is a financial technology which leverages technology to deliver superior financial services. By nature, Fintech is disruptive and has outperformed traditional banking and financial services sector. Fintech solutions include the development of applications, business models, products and processes for the financial services industry. Earlier Fintech solutions were limited to backend operations of few well-established financial institutions and banks until came the modern era where customers demanded better services. Yes, it is the internet and the smartphone boom which put the fintech services onto the front stage, only to witness its rapid growth.
Fintech comprises new technologies or innovation that are meant to assist users in all transactions having monetary value.
Fintech has already set its foot in various financial sectors. A few sectors which are greatly dependent on this innovative technology are:
Banks & Financial Institutions
Are banks and Fintech firms friends or foe? The answer is simple – Fintech firms from its inception will and has always tried to simplify the banking experience with its various features like the data enrichment, user-friendly platforms, and technologies that understands its customers for good.
Fintech mainly focuses on delivering enterprise solutions to banks that takes its consumers to a highly customized and intimate world of banking facilities that was once a lengthy and tiresome set of procedures to perform any transaction. For instance, with the adoption of Fintech, credit unions have been able to offer credible consumers a hassle-free way of getting loans quickly and easily.
According to a survey, the millennials still prefer visiting a local branch for high-value transactions, and this visibly shows how banks have failed convincing its consumers on using the digital technologies, or the users denied such services due to fear of losing its huge operational structure. It is estimated that about 70% of the population agrees to be comfortable using both digital and the traditional approaches simultaneously.
Alternative finance and fintech go hand-in-hand when it comes to lending, borrowing or investing. Alternative finance institutions stretch their assets and operations beyond the traditional banking system.
Alternative finance is not a new concept and it represents the “sharing economy world” in the financial services industry. With the help of fintech, it is set to flourish becoming a borrower’s blessing, a lender’s good soil and an investor’s guaranteed growth.
The pain point in every traditional banking system is its inability to support borrowers with its highly complicated and lengthy credit appraisal procedures. Alternative finance serves as a better option for low credit score borrowers who are most likely to be rejected by financial institutions, as their CIBIL scores mostly fail to entertain the latter.
Fintech boosting functions of alternative finances’ with its extremely effective features and products seems to be greatly inclined towards the lenders and investors as far as the benefits are concerned. Borrowers are experiencing a blissful experience of utilizing the features and facilities designed to help them obtain unsecured and secured loans superfast, paperless and most importantly in a hassle-free manner.
The first thing that strikes every consumer while making payments is the charge or fee associated with it. Also, to transact overseas is a pain, but not anymore. Fintech has come to the rescue with its exceptionally good payment technologies which enables worldwide payment transactions of all types in no time and at less or zero cost.
Fintech doesn’t only offer a new and simple solution to retail consumers on how and when they choose to initiate payments, but it also has entered the business world with highly business-centric, secure, and customized payments solutions for their complex and ever-changing business needs.
Banks are bound to consider the increased compliance specifications since the 2008 financial crisis while acquiring, building and maintaining the huge legacy systems that they have purchased to serve their clients. Banks should also spend a considerable amount of time and cost to make this happen. For now, Fintech companies, however, don’t have to abide by these regulatory compliances; instead, they are focussing on building client-centric solutions.
Fintech in the wealth management sector evolved in the form of Robo-advisors. Robo-advisory platforms are emerging technology platforms; an incredible build of algorithms and programs that managed to know its customer deeply and provide financial advice or investment ideas accordingly.
Robo-advisors are gaining popularity by working on the two important aspects of asset and wealth management: Security and Big Data. Identity verification, secure communication, document management are a few of the major concerns taken into account to provide users with a safe and no-glitch experience.
Secondly, considering the powerful big data systems integrated into robo-advisory platforms, it’s helping them improvise financial decisions by rendering data pertaining to investor’s risk appetite, tax status, liquidity needs and various other factors. Additionally think about those plenty insurance schemes, bonds, equity shares etc. available in the market; fluctuating interest rates and changing government policies – all these matched to user’s interests delivers a much reliable and efficient advisory.
Over the past few months, the word blockchain and especially the bitcoin has been ringing in the ears of all traders and businesses making transactions worldwide. Well, fortunately, it is one of the absolutely useful innovations that fintech delivered.
Blockchain technology is known for its decentralized and distributed nature which ensures data integrity and security of any transactions that takes place over its network. One of its remarkable characteristics is it is totally repellent to tampering with the data and anything of value over its chain of operation. This unique feature has prompted every financial service industry sector from retail banking to insurance to investment, to adopt this phenomenal technology and its possibilities.
Fintech foresees its success in imbibing new technologies like the AI (artificial intelligence), machine learning, data analytics etc. But, Are we ready to embrace this meteoric change that is ready to take-over even a part of our thinking and decision-making ability?
India stands first among many countries using mobile technology to purchase financial products, about 55% of the population uses Fintech in some form or the other. We’ll be relying on fintech services completely in the near future. This advancement in technology urges progress in individuals to utilize services made available at fingertips to stay on par with the new standard of living.