Future of FinTech

Once thought to be a disruptor, FinTech is today an innovator and enabler. Financial technology, or Fintech as it is better known, began with nimbler start-ups first disrupting banks with their innovative approaches and later evolved with the latter also building partnerships with the banks to strengthen the entire financial services ecosystem.

The FinTech industry comprises a variety of financial businesses such as online Peer-to-Peer lending, SMB finance, crowd-funding platforms, wealth management & asset management platforms, cryptocurrency, trading management, mobile payments platforms and money/remittance transfer and the list goes on. The versatility of FinTech is so profound that every sector is experiencing a make-over due to FinTech Innovations on daily basis.  In fact, FinTech is now on the verge of changing the core requirement of a sector itself. For e.g. It is perceived that Banking will exist even if the banks don’t. FinTech can altogether eliminate conventional banking.

Innovation in FinTech is inspired by customers’ search for “seamless solution” as they demand seamless experience with their banks and other financial institutions.  Giving a tough competition to small money-lenders is the data-driven lending by banks and non-banking financial institutions which has brought formal credit to more individuals and micro, small and medium enterprises. Digital-only banks are offering banking solutions to digital-savvy customers and differentiating through transparent operations, ease of use and faster loan processing at a lower cost. Anticipating this, banks are creating new businesses within their existing structures that adapt and collaborate to meet these challenges. There are cases of banks today that allow startups embed their API, allowing customers to create current accounts from within their apps. Moreover, with digital payments which can be tracked to develop a credit history of a borrower, it has become easier to avail formal credit at lower rates as compared to high-costing informal credit. FinTech platforms enjoy a competitive edge due to cost-effective operations and fewer regulations than the traditional finance sector.

FinTech needs to focus on the customer experience and services to thrive in the digital age. The focus on the customer centric (B2C) segment such as retail banking over the near-term will hold the key. However, in long-term mobile is the key. Don’t be surprised if future citizens move out of homes without any money or credit cards. Though FinTech has been investing in innovation, the partnership with big financial players needs to be kept in mind. This is because growth can never happen in isolation. In fact, the line between banks and FinTech companies are set to blur, so just about everyone in finance is set to compete with old and new players alike.

FinTech speed-o-meter started accelerating with the rise of digital e-commerce and the sharing economy. With the range of disruptive technologies including artificial intelligence (AI), machine learning, mobile payments, product design and blockchain implementation, many predict investment and merger and acquisition activity to pick up in this sector. So, don’t be surprised if pioneers like PayPal gets taken over by tech giants like Google and Apple. Artificial Intelligence is expected to move ahead from social media algorithm, robo-advisors, fraud detection and self-driven cars to develop a complete automated society. Remember, ‘Convenience’ of users is the key word here.

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