Fintech is the axiom for the digital financial technology, which describes the evolving intersection of financial services, and technology. It is a term that describes a segment of competitors using digital technology, analytics and mobile platforms to facilitate daily banking more efficiently. This new digital technology is impacting the financial service industry, along with any others that have dealings in the financial services sector as well.
While some of the industry's leading providers have been delivering financial technology solutions for decades, increased interest in fintech the past three years is due to consumer expectancies involving digital delivery of financial services. Presently fintech is serving specific consumer and business needs such as mobile payment and money transfers, crowd-funding for start-up and non-profit entities, crowd-lending for business and individuals, and personal financial management tools including asset management and budgeting.
Traditional banking institutions have paid little to no attention to the industry changes, nor have they responded to consumer and business needs. However, as the fintech market rapidly expands and the consuming public is paying attention, the banks are finally taking note.
Although several fintech trends are increasingly disturbing retail banking, traditional banking institutions are not defenseless. There are many ways traditional banks can make these fintech trends work to their advantage. Some of those fintech trends include quick money transferring, interactive banking on bots, paying with mobile devices and the Bitcoin.
Quick money transferring
Transferring funds from a personal bank account to someone else is often time-consuming and frustrating. Even with all of the available technology at banks, it is still difficult for consumers to make this transaction at their primary banks.
PayPal, Venmo and Square Cash are new fintech services available to simplify and speed up the transfer process. Also, there are others that allow consumers to make person-to-person (P2P) transfers. The P2P services require some time to setup, but then it is fast and straightforward.
Only a few banks are implementing faster transfers, but only for businesses' ACH transfers. It is the efforts of fintech companies that are trying to get the same speed, for all types of transactions, to consumers. The banks need to focus on moving funds more quickly for all customers, consumers and business, as well.
Interactive banking on bots
A vast number of people are spending most of their time in the instant messaging platforms, which is the reasoning behind the popularity of chat bots. The new technology of chat bots and text messenger-based payments bypasses the need to use a retail bank for transactions such as paying by check or credit card. Many of the larger banks are already including bot features to their customer service tool set. The potential of chat bot technology is limitless. Forthcoming, all banking brands will offer chat bots, enhancing customers' user experiences through bots.
Paying with mobile devices
Today, purchases do not even require opening a physical wallet. Through the technologies of Apple Pay, Android Pay and Samsung Pay it is possible to link credit or debit cards to smart phones or watches. The digital wallets turn cash into digital currency, which is useful for online purchases and funds transfers.
The Bitcoin is a digital currency with encryption that regulates its unit value, allowing the transferring of funds with no need for a central bank. Presently, not many banking consumers are using the Bitcoin form of payment. However, as consumers begin to test the waters, the banking institutions need to identify customers using the crypto currency and in what ways to better understand how it influences their general satisfaction. As a rule, 64 percent of highly satisfied customers are more likely to stay loyal to a brand.
The only way for retail banks to mitigate the risk of losing existing and potential customers to fintech is to focus on what is most important: the customer. Banks must fully understand the motivations and expectations of their customer base. The banks should concentrate on delivering fast, secure and accessible payment with numerous devices. For the banks to remain competitive, they must adjust business strategies, innovate new technologies and payment framework and provide better products and services to customers.
An ultimate solution is for the fintech start-ups to learn to work with the banks by embracing their expertise, knowledge and the advantages they possess. Traditional banks will prosper most by encompassing the fintech technology. Fintech companies and traditional banks will both benefit more if their relationships are cooperative ones.
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