5 Ways Fintech is Taking Over the Financial Industry
Fintech has entered the spotlight in recent years, taking the financial world by storm. The emergence of financial technology tools has drawn customers, particularly the younger generation, away from traditional banking services and towards new, innovative ways to manage their finances.
Unlike traditional banking systems and services, fintech players have become much better suited to future financial success. This has led to a fundamental shift in the financial industry—one that’s likely to have lasting impacts.
Let’s examine the top ways that fintech is impacting the financial industry.
What is Fintech?
If you’ve paid attention to the latest developments in the banking world, you’ve probably heard the term “fintech” thrown around more than once. But what exactly is fintech? Essentially, fintech refers to the integration between technology and financial services. Fintech, then, is a portmanteau of “financial technology” and aims to compete with traditional financial methods in delivering such services.
Fintech involves software, algorithms, and hardware that enable everything from check deposit to bill payment to applying for financial aid. Businesses have come to rely on fintech for various types of transactions. In the wake of the pandemic, companies have also been turning to fintech for contactless solutions.
What Are The Latest Growing Areas in Fintech?
Fintech isn’t just one thing; it comprises multiple tools and technologies applied across the financial sector. Here are some of the hottest growing areas in fintech today.
There are many ways that artificial intelligence can be leveraged in fintech. For one, it can be used to enhance security, leading to behavioral solutions and monitoring how customers interact with their transactions. For instance, if the algorithm notices that a customer withdraws a large amount of money—much more than they typically take from their account—fintech tools can flag this activity as potentially fraudulent and block it.
Biometric security is another avenue by which fintech can improve user safety. Fintech products and services can work with biosecurity authentication tools such as retina and fingerprint detection to protect customer data.
Obtaining bank charters has allowed fintech companies to offer financial services similar to those of traditional banks—namely, lending opportunities. Fintechs have gained access to bank charters by acquiring existing banks. In a prominent example, SoFi acquired the Golden Pacific bank for $22.3 million, blurring the lines between banking and fintech.
More and more people realize the value of fintech when it comes to managing their personal finance. For instance, fintech apps can be used to help consolidate your debt and track your budget, and they can also provide insights into your spending habits and help you determine more efficient ways to save.
How is Fintech Changing the Banking Business?
Fintech has rattled the banking industry, forcing many traditional financial institutions to reevaluate their offerings and find ways to provide more innovative services to customers to remain relevant in the space. The following are some of the top ways that fintech is transforming the banking world.
1. Improving Customer Service
Fintech is changing customer service for the better. Today, people expect a flexible, convenient customer service experience. They don’t want to have to wait in line at branch locations, nor do they wish to sit on the phone for hours at a time waiting to speak to a representative. Fintech products and services allow customers to control how, when, and where they receive support.
2. Bridging the Credit Gap For New Borrowers
Fintech firms are using novel methods to analyze data and assess the needs of first-time borrowers. They’re using alternative credit scoring processes and offering customized loans that cannot be obtained via traditional banking channels. In this way, they open the door to potential borrowers that may not otherwise be approved for credit.
3. Offering Smart Solutions
By taking note of what traditional banks do and do not offer, fintechs are targeting areas in finance that demand the most urgent attention. As a result, they have stepped into a vacuum and worked to fill that space with innovative solutions to improve the customer experience. More than 80% of banks fear that up to 20% of their business could be lost to standalone fintech companies within the next five years, demonstrating the banking industry’s self-awareness in terms of what it lacks.
Fintech is actively working to close that gap, especially in providing personal finance management tools and peer-to-peer marketplaces for customers who cannot secure loans through traditional banking sources.
4. Accelerating Digitization
It’s no secret that digital finance has taken off over the past several years, especially since the start of the pandemic. The rise of mobile banking has allowed customers to access and manage their finances remotely, and online support services have drastically improved the way people can interact with their banks and receive help. As fintech entered the scene, this digitization process sped up. Many fintech products and solutions can be accessed digitally, providing a convenient way for users to take care of their financial needs. People can make digital transactions, use AI-powered chatbots, and much more.
5. Giving Small Businesses a Leg Up
Fintech has been a game-changer for small and emerging businesses. Many startups struggled to secure loans and manage their payment processes in the past. However, with the rise of fintech, small businesses are in a better position for success. They have greater access to tools and services previously unavailable to them via traditional banking methods.
Is Fintech Really the Best Option For Banking in the Future?
To keep up in an ever-evolving industry, there is no question that banks will need to adopt fintech solutions to remain competitive. People are no longer satisfied with outdated banking solutions. Instead, they’re turning to the digital, innovative solutions offered by fintech, and they are coming to expect these options from their banks.
SoFi is one of the most prominent players in the fintech space to date, attracting over three million members and offering $59 billion in funded loans. They are paving the way for the future fintech companies, and traditional banks would do well to follow the lead of SoFi and other prominent fintech players today. Banks can start by implementing more digital solutions and eventually incorporate fintech solutions themselves. This transition from traditional to new can be challenging for many financial institutions, but it’s become imperative to stay afloat—and, hopefully, exceed customer expectations—in the current climate.
Teksetra is Here to Help!
It can be difficult to know how to get started when considering partnering with fintech firms or adopting fintech services. You may fear that your business lacks the software and infrastructure to make it work.
Thankfully, Teksetra’s got you covered.
With more than 45 years of expertise, no one understands your needs like Teksetra. We offer financial solutions backed by comprehensive tech and support, and we partner with top consultants in the industry. We can also help you consolidate vendors, getting the tech support you need when you need it—no more wasted time contacting and coordinating with multiple vendors.
If you are interested in learning more about Teksetra’s services and how we can aid your business in fintech adoption, reach out to us today!
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