Image Credit: “Fintech Financial Technology Icon Over Smartphone” by Raisin – Finance Stock Images is licensed under CC BY 2.0
The following was written by Ramona Jordyn for the exclusive use of finovera.com
Banks offer plenty of services, but they are first and foremost money depositories that store and retrieve cash. Although banks have remained one of the most dominant financial institutions, the arrival of financial technology (fintech) has challenged traditional banking in their delivery of financial services.
Pre-pandemic, fintech adoption had been doubling every two years; adoption rates climbed from 16% in 2015 to 64% in 2019. In 2020, the agility of fintech proved essential for business survival, enabling rapid migration to digital payments and contactless technology. Experts believe that fintech will continue to grow as it supports the “unbanked,” or people who have limited or no access to traditional bank accounts.
It wasn’t until the second half of 2010 that banks started to realize how mobile-only banks and anti-laundering software better served consumer needs. Soon, banks began to integrate fintech innovations into their service models. Finovera’s end user tools, for example, utilize data extracted from bills and statements, allowing financial institutions to develop new features and incorporate hyper-personalization into digital platforms. The big question now is: how will fintech continue to push brick-and-mortar banks to reinvent the banking experience?
How Fintech Reshaped Banking
Fintech revolutionized the way consumers access their finances; from mobile payments and alternative finance to fund management and stock trading features, fintech provides consumers with an easy option to access financial services, without them having to set up a bank account.
The need for quick and safe services drove fintech startups to innovate certain processes. Thanks to fintech, users can easily fulfill online transactions that process interbank payments, and even skip traditional bank processes with omnichannel and branchless banking. E-wallets expand consumer capabilities by allowing for P2P payments, international remittances, and ticket bookings — to name a few. Mobile banking also stemmed from fintech; most banks now have mobile apps that cover almost all basic banking functions.
Aside from reducing consumer dependency on brick-and-mortar banking branches, fintech has also promoted better customer experiences. Customer service chatbots designed with machine learning capabilities streamline customer transactions, handle queries, and direct customers to relevant information. Artificial intelligence is also being developed to prevent fraudulent transactions.
Overall, the growth of fintech has turned time-consuming, antiquated banking procedures into frictionless and seamless experiences. Still, many people do remain loyal to brick-and-mortar banks, especially if they want someone to handle complex operations and receive personalized product advice.
Adapting to Fintech’s Disruption
Consumers cannot simply switch away completely from banks to fintech. In some cases, fintech businesses found themselves “debanked” due to anti-competitive behavior from banks. Fintech startups still need banks to operate their businesses and access payment rails. This is why fintech should not be considered as the competition; rather, banks should engage in strategic collaborations with fintech companies to stay innovative and agile in a digital age. Moreover, fintech companies can also benefit from the established public trust that banks enjoy.
Of course, banks should plan carefully before jumping into fintech partnerships. It’s necessary to do due diligence and bring in the perspective of financial analysts. Fortunately, it’s much easier now to collaborate with professionals who have credentials in relevant fields, especially as experts both here and abroad can be accessed online. As well as being able to connect with them online, many of these experts will have now undergone their training through online courses. Top universities have expanded their programs to include online courses that are just as valid as on-campus degrees. Consulting with someone who has an online financial services degree can be extremely helpful, because they undergo training in courses that study financial institutions, specifically in money and banking. Their financial knowledge, coupled with core business skills and experience with the relevant technology, can provide valuable insights into fintech adoption.
Overall, accelerated bank tech should make things easier customers while running smoothly with servicing and operations. Banks should consider what impacts the customer experience on both sides, and invest in fintech capabilities that allow banks to perform their core services.