How Fintech is Reshaping the Future of Traditional Banking

Fintech or financial technology has changed the financial landscape over the past few years. The global fintech market size is expected to reach USD 332.5 billion by 2028 and is expected to grow at a compound annual growth rate (CAGR) of 19.8%.

Fintech as we understand it spans a wide range of financial services and the areas where it is most prevalent include lending and credit, wealth and brokerage, and payments and transactions. It is also developing in the blockchain, neo-banks and real estate loans and is shaking up traditional banking practices.

According to a report by the Bank for International Settlements, fintech innovations have potential benefits for all users of financial services.

The millennial population has helped fintech become a disruptive force. They are very demanding and expect personalized products and services. They also prefer to seek information online rather than physical visits.

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This fintech growth can be attributed to its services, making banking and finance more accessible and streamlined for users. Fintech uses automation to speed up processes, and loan and mortgage applications can be done online without any human interaction. This upsets traditional players.

How will the future of the bank be impacted?

Technologies such as blockchain, artificial intelligence and alternative lending are powerful forces for financial services platforms. They have changed the way banking is done. A large majority of banking organizations are integrating digital services to compete with all-digital startups.

The development of virtual voice assistants and chatbots has improved customer satisfaction and experience like never before. They replace the need for trained customer service professionals to be available 24/7. Overall, this has led to a smoother banking experience for everyone.

Why should fintech and banks work together?
Customer demands for financial services have changed, as have banking behaviors. Here’s how:

● Technology gap: By using technologies to create customer-centric products and services, fintech has the upper hand. Banks can use fintech to build APIs or extend their stack with the bank’s existing architecture.

● Customer satisfaction: The overall customer experience offered by a fintech is something that banks can leverage. Fintechs are faster, more efficient and secure with lower costs. Their mantra is to earn trust through better customer service and customer acquisition by referral. This will help banks improve their services.

● Improved brand image: Again, with modern tools like gamification, fintech apps can make tasks like budgeting more exciting for customers. They refresh the brand image of legacy services, which is what banks need.

● Use of mobile devices: The use of mobile devices and the Internet has increased a lot. Any business that wants to connect with its customers has mobile-friendly products. They can offer faster transactions and real-time information.

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● Better services: The pandemic has moved everything online, and now customers see online services as more convenient than physical visits to banks. Time constraint is no longer a problem. Transactions can be made at any time without hassle. One can track the status of their transactions and even easily find lenders for a short term loan or a payday loan. Fintech also adds efficiency to the whole banking process. Automation can provide a higher level of specialization and the quality of service is bound to improve.

● Focus on security: Fintech is focused on making banking safe for everyone and taking steps to protect customer financial information. From adopting AI for fraud detection to using advanced blockchain systems, RegTech, multi-cloud data storage and IoT for smarter security solutions, there are multiple security enablers available.

Fintech can perfectly complement traditional banking by using data in smarter ways and offering data analytics. Neo-banking is another force that is changing conventional banking methods. These are digital banks that conduct transactions entirely online. Neo-banks are therefore certainly on the rise.

For banks, the best strategy is to expand their branches and integrate with the best financial technologies. And for fintech, an ideal strategy is to build their product and expand their market share.

Fintech – a major force in economic contribution
This is the era of fintech. Banks need to adapt to digital trends as soon as they can. There is a growing expectation from product-based models to customer-based models, and it will continue to stay that way. By striking the right balance between partnerships and investments, traditional banks can take advantage of innovative solutions and meet the ever-changing needs of their users.

Assigned to Satyajit Kanekarco-founder and CEO of Mobileware Technologies.

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