The digitization of financial services & money opens more opportunities to create more inclusive & efficient financial services to promote economic growth.
FinTech gives customers the power to make their own financial choices, resulting in higher levels of financial literacy than ever. FinTech simplifies banking customers’ lives by fusing conventional financial services with cutting-edge digital technology and Big Data products.
Heather Bendes, VP of Finance with Everyware, says, “Traditional banking used to mean visiting a branch in-person to withdraw, transfer funds, or visit an ATM. While those options are still available, FinTech offers creative solutions that simplify the banking experience. The same actions can now be accomplished online or through phone apps. FinTech advancements have enabled banks to customize services and give customers exactly what they need when they need it.”
How is FinTech influencing Traditional Banking Methods
Banks and other financial institutions are some of the most refined businesses globally, so in many cases, their cyber hygiene is adequate. Yet, their regulators and the public control them to high standards, given their societal roles and custody of some of our most important data.
Tom Egglestone, International Claims Leader, UK, and Europe, says, “A higher level of scrutiny if insufficient controls lead to privacy breaches and a greater risk of reputation damage, so cyber risk controls must remain high on their agenda. Cyber risk controls go beyond protecting borders. It’s also ensuring internal processes are robust and combat the chance of inadvertent privacy breaches or insider actions, as shown in the incident experienced by Desjardins that eventually led to a significant, high-profile third-party class action in the Canadian courts.”
Why Banking & FinTech should work together
Customer demands from financial services have evolved, as have people’s banking behaviors. Here’s how:
Technology Gap
Adding technologies to construct customer-focused products and services, FinTech has the upper hand.
Banks can use FinTech to create API or develop their stack with the bank’s existing architecture.
Customer Satisfaction
The comprehensive customer experience that FinTech proposes is something banks can leverage. FinTechs are quicker, more efficient, and protected with lower expenses. Their strategy is accumulating conviction through better customer service and referral-based client acquisition.
Better Brand Awareness
With modern tools like gamification, FinTech applications can push budgeting more compelling for customers. They are rejuvenating the branding of legacy services, which is something banks require.
Mobile-friendly devices
The use of mobile appliances and the internet has enhanced a lot. Any business that enjoys linking with its customers offers mobile-friendly products. They can provide speedier transactions and real-time information.
Better customer services
The pandemic diverted everything online, and now customers believe online services are more convenient than traditional banking methods. Time limitation is no longer an issue. Transactions can be accomplished anytime without hassle—transaction status tracking and finding lenders quickly for a short-term loan.
FinTech also comprises efficiency in the fundamental banking process. Automation can deliver a higher domain level, and service quality is bound to enhance.
“Banking and FinTech should collaborate because FinTech can provide specialized services outside Banking’s core offerings. New software and security solutions provided by FinTechs help banks respond to the growing demands of their customers for security, convenience, and ease of use,” says Heather.
Focus on security
FinTech concentrates on bank security for everyone and tries to protect customers’ financial data. Multiple security enablers are available, from embracing AI for fraud detection to employing advanced Blockchain systems, RegTech, multi-cloud data storage, and IoT for more innovative security solutions.
FinTech can complement traditional banking by employing data more intelligently and proposing data analysis. Neo-banking is another point that is transforming the conventional ways of banking. They are digital banks that operate transactions online wholly. Therefore, Neo-banks are definitely on the rise.
How secure is FinTech to Traditional Banking?
While Fintech has proliferated and offers several advantages, such as substantial cost deduction, enhanced customer retention, and differentiation of financial institutions from the competition, it gives its fair share of threats and indecisiveness.
With the increased internet involvement, data ubiquity & data security will be significant challenges for the FinTech industry. The combination of phone and online banking services has increased, which has enabled enterprises to gather a massive amount of data having customers’ information that can be used to generate insights into customer buying patterns & customer retention.
Another FinTech security risk is the establishment of data ownership through a combination of technical & legal measures.
Enforcing a mechanism to dispose of customer data securely after they unsubscribe from FinTech services is the way to overcome potential litigation threats.
Also Read: Euler Finance, a DeFi Lender, Announced That It Was Hit by USD 197 Million Hack
What contribution is FinTech making to Economic growth?
In the era of FinTech, banks must adopt digital trends as soon as possible to meet the growing expectation from product-based to customer-based models.
By creating the right balance between partnerships and investments, traditional banks can leverage new solutions and fulfill the ever-changing users’.
“FinTech innovations can bring efficiency to banking processes, increase speed to market, enhance the digital customer experience, and enable banks to reach underserved markets, such as small businesses. Improving banking services and access to capital for entrepreneurs can help them grow,” Heather adds.
As FinTech is adding transformation to the financial sector landscape rapidly, it is slowly eliminating the boundaries of both financial firms & financial sectors.
How will the future of banking be impacted?
The rise of FinTech is double-edged for the banking sector. It has opened opportunities to enhance banking customer services using tools such as chatbots, mobile apps, and machine learning to improve customer experience with a real-time perspective about their bank accounts and security against fraud risks.
“The development of virtual voice assistants and chatbots has enhanced customer satisfaction and experience like never before. They replace the need for skilled customer care professionals to be available 24X7. Overall, it has led to a smoother banking experience for everyone,” says Heather.
FinTech is challenging traditional banking & financial services from all aspects, so it has threatened the financial institution’s future.
“Technologies such as Blockchain, artificial intelligence, and alternative lending are powerful forces for financial service platforms. They have changed the way banking is done. A vast majority of banking organizations are integrating digital services to compete with fully digital startups,” says Heather.
It has also helped non-financial companies to offer customers financial products, like e-wallets, online insurance, cybersecurity insurance, etc.
