The future of Fintech Banking
By: Kosta Du
Tags: Management, Evolution, Impact, Fintech, Banking

We are already going through one of the most critical metamorphosis in business history — the FinTech evolution. And it’s going to switch banking as we know it.

For short, financial technology, or FinTech, is the innovative use of technology to design and deliver business assistance. It’s changing finance through a broad range of benefits and technologies, from artificial intelligence and blockchain to digital payments and robot-advisors.

Fintechs typically offer “better user experience, lower fees, and a customized focus on clearing up a fixed issue. They can also develop products faster and cheaper than big banks as they don’t have the legacy staff and systems to fund or contend with.”

Traditional banks are generally slower to the punch when it comes to this, and charges will hit many people, large margins, and limited hours in which they can seek assistance from customer support.

The big banks’ infrastructure also allows little room for agility — meaning that fintech could extent and grow aggressively, offering new products and services all the time, while the banks are merely getting on digital technologies to improve their existing services.

A bit of history

Historically, as technology evolved, the banking services industry used to be quite fast to adopt innovations to serve customers better. However, all of this changed during the global financial crisis of 2008.

During the crisis, banks focused on complying with the numerous new rules, regulatory requirements, and fines imposed on them. Innovation was a very distant priority.

In the same period, technology was having an unprecedented boom. During that same period, there was a series of game-changing technological innovations that transformed how we lived and became part of our daily lives — the iPhone, Airbnb, Uber, WhatsApp, WeChat — for example. There was already a considerable gap between traditional banks’ technologies and the rising standards of modern customers. They demanded more flexibility, convenience, and a streamlined user experience.

How are banks reacting?

Banks are worried about these large tech firms as they not only have much-existing information with clients like yourselves every day but also have, to a precise extent, your protection and assurance. For example, if you share your kids’ photos on Facebook, wouldn’t you count on them to transfer money to your family as well? If you buy most of your daily basics from Amazon, wouldn’t you also use them to search and purchase insurance products as well?

What also worries banks is that thousands of new and dynamic FinTech startups now offer products that used to be controlled by traditional financial players. For example, peer to peer lending platforms now provides customers an alternative for loans that you used to get from a bank. Robo-advisory platforms offer asset management solutions that are more transparent in what they charge you and substantially cheaper.

But banks realize that the landscape is changing and surviving. They need to develop. Some banks will thrive in this evolution by embedding this culture of innovation and entrepreneurship across their organization. But many will not.

Citibank predicts that over the next ten years, direct job losses but also indirect ones will damage the related economy around the financial services industry, from law firms and accounting firms to hotels and restaurants. In the future, some new jobs will create with FinTechs but in substantially smaller numbers. And these are very different jobs with very different skill sets than those required from bankers today — these new jobs are for programmers and data scientists, not traders or compliance officers.

In conclusion, the FinTech industry is continuing to transform how financial services are delivered. Consumers will generally be great beneficiaries from a user experience or convenience perspective and access and cost savings.