In this growing era of technology, technology has in one way or the other replaced some sectors of the economy, however, there is a strong chance that this replacement might cut across the banking sector as well.
Overtime, there has been an incredible increase in the number of new FinTech start-ups, especially those involved with digital payments, lending, and wealth sectors.
Fintech stands for financial technology, however, this does not apply to a specific type of technology, but also to a broad range of technological developments that have fundamentally changed the way financial services are provided.
Presently, Fintechs are trying to be more like banks, from being a payments business to a lending marketplace. Furthermore, Fintech uses modern technology such as artificial intelligence, big data, and cloud computing to provide customers with a mind-blowing service that prioritizes faultless delivery, customization, speed, and relevance.
Innovative financial products and services such as banking software and banking apps have also been created using Fintech, thereby offering numerous exciting potential to the world at large.
Now, because of their more efficient business structures, Fintech firms can offer products and services that are up to ten times more efficient and less expensive than traditional banks. This has raised a lot of suspicions and questions if Fintech would replace Banks.
Even though most Fintechs do not have a banking license they still offer Person- 2– Person payments services, however, the restraining factor is that they cannot hold customers’ money as deposits, just like the traditional banks.
As a result, banks are constantly losing their customers, and they are still unable to launch new services or products that would meet client wants or difficulties at the same rate as these Fintech firms.
For instance, to open an account or apply for financial services, most banks require you to be physically present, because not every bank has the needed technological facilities to validate your identification online. As a result, traditional banking becomes less convenient for consumers, and this has overtime led to an unhappy experience.
It is fair enough to say that these Fintech firms have in one way or the other disrupted the services of traditional banks because of the services they offer, as these services are what traditional banks are expected to offer but lack the technology to do so.
Technically, Fintechs provide users with capabilities that are more advanced and practically all of the same services that traditional banks should offer.
Interestingly, many established banks have attempted to acquire Fintech start-ups and collaborate with them in order to develop their own digital offerings.
Banks and Fintech startups share the role of financial intermediaries, despite the fact that banks have been in business for hundreds of years, yet they must undergo fundamental transformations alongside the Fintech firms, in order to fulfill the needs of today’s consumers.
Most individuals predict that in few years to come, Fintech companies might replace traditional banks, however, this cannot be trusted because most consumers still have total trust and continued reliance on banks for safekeeping their money. This is because, over the years, banks have created a level of trust that Fintech companies do not totally have with their consumers, and they will have to be more patient to gain this trust over time.
Nevertheless, it is evident that financial technology or Fintech, will continue to grow this year and become more beneficial in the future.
In conclusion, as a result of the constant losing and reduction of customers on the side of the banking sector, a collaborative environment is suggested. This is collaboration between banks and Fintech companies, whereby banks can share their infrastructure with these Fintech organizations.
That way, banks would not lose all their customers to Fintech companies and on the other hand, Fintech companies would still make their profit while collaborating with banks, instead of attempting to totally take over the banking sector.Featured image: Technext
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