How has Fintech Revolutionised Banking?

Fintech has been becoming more and more common with the banking sector. There is a need for every entrepreneur to have a clear understanding of what it is, how it works, and how beneficial or damaging it can be to traditional business models.

How has Fintech Revolutionised Banking?

The fourth industrial revolution is completely transforming the business environment into one digital community; individuals interact efficiently and do all their business online. Fintech is one of the fields which has emerged as a result of this technological change adapting into the banking and finance sector.

Fintech has been becoming more and more common with the banking sector. There is a need for every entrepreneur to have a clear understanding of what it is, how it works, and how beneficial or damaging it can be to traditional business models.

What is Fintech?

Fintech, as the name suggests, refers to all technologies used in the financial services sector, on the back end of their operations as well as in customer interfaces. The use of Fintech has grown exponentially over the last decade.

Statistics show a dramatic increase, from US$930million in 2008 to US$12billion in 2015, in the investment in Fintech from all over the world. This growth is rate is nowhere close to slowing and is expected to increase even more as the use of fintech expands in not only the financial services industry, but in every sector involved within the financial services sector.

Fintech and Traditional Banking

Fintech has presented itself as an emerging and ever-growing industry, bringing together two integral elements of the modern market i.e. finance and technology. Indeed, it has completely revolutionised the primary financial institutions: the banks.

While it has posed a threat to traditional banking, by wiping out conventional banking techniques, fintech has also provided countless opportunities for new players in the financial market. Here are some areas in which fintech has transformed conventional banking completely.

Cost and Time Efficient Transactions

In a world as dynamic as ours and in work routines as busy as today’s, being efficient is the number one consideration. By providing banking solutions such as online deposits, mobile payments, and remote financial assistance, fintech has made finance cheaper and faster.

Businesses now prefer digital fintech start-ups for all their banking solutions, typically choosing them over conventional institutions. The main driver for this change? Fintech saves their most important resource - time.

Remote Access

Fintech has developed an environment where all financial transactions can take place in a digital space, without the customers needing to visit a physical bank. Customers are now used to remotely accessing their banking and investing information.

It is now pretty normal for them to be able to deposit a cheque while having their morning coffee. This has allowed the customers in remote geographical areas to use and access all kinds of banking services online, from anywhere in the world.

Socio-economic Growth

The remote access has also served as a source of financial literacy for people who have never stepped into a bricks and mortar bank. This has contributed to the socio-economic growth of this demographic by introducing them to accessible banking.

One such example is the introduction of M-Pesa, a mobile banking solution, in Kenya 10 years ago. From people not even know what banking was, it has grown to more than 17 million users making transactions via their mobile phones.

Fraud Protection

Fintech incorporates a lot of Artificial Intelligence (AI) and computer automation. This has meant the banking system has become relatively fraud-proof, machine can’t be fooled like man.

Fraudulent transactions can be easily tracked to their root and the party responsible can be easily identified. Security measures such as encryption and three-way user verification have also made the possibility of any hacks or breaches near impossible.

The Future of Fintech

Outwardly, fintech has completely disrupted conventional banking systems by giving power to customers. However, all the tools provided also help banks improve their service offering and differentiation.

Traditional banks are now investing more in the very technology that was built to get them out of the business. Business Insider suggests the following trends for the growth of fintech in the near future:

  • The use of AI and blockchain technologies in banking finally evolving from hype to reality.
  • The development of more geographical centres offering fintech services globally.
  • An increase in the regulatory scrutiny for fintech services internationally.
  • The evolution of a global open-banking movement, structurally reshaping financial services.

Sources

Growth in Fintech Investment Fastest in European Market, according to Accenture Study

How Fintech Is Transforming The Middle East, Africa and South Asia's Financial Service Industry

THE FUTURE OF FINTECH 2019: The five megatrends reshaping the financial services value chain