The FinTech Revolution: Understanding the Impact on Banking

Quick Summary: FinTech is disrupting the banking industry with its innovative approach to delivering banking services and improving customer experience. Read this blog for a complete understanding of what FinTech is and how it is impacting the banking industry.

The finance sector has seen a dramatic shift in the past few years globally with the emergence of FinTech companies. FinTech is transforming the banking and finance sector with its innovative services and technologies. Today, it covers a myriad of services such as wealth management, payments, investment banking, and more.

The FinTech revolution in banking and financial services poses a threat to traditional banks that must adapt to stay ahead of the curve. It offers quick and convenient ways to manage finances with the use of digital solutions like software and apps. There is a wide range of FinTech software today that allows users to access and manage their finances on the go.

According to the data from Statista, there are more than 29,900 FinTech startups worldwide as of 2024. The rising dominance of FinTech companies is poised to reshape our imagination of banking. But the question is – what is FinTech and how is it going to impact the banking sector? In this post, we will ponder upon this question to get a suitable answer. Keep reading to get useful insights.

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What is FinTech All About?

FinTech refers to companies that deliver financial services with the use of digital technology. So, instead of traditional paper-based finance and banking processes, FinTech offers digital mediums for financial products and services. Considering the term FinTech, it is a word formed by joining “Finance” and “Technology.”

FinTechs use technology to offer a wide range of services like deposits, loan origination, money transfers, payments, etc. Plus, cryptocurrency, digital wallets, borrowing through online platforms and apps, crowdfunding, Insurtech are all examples of FinTech.

Today, fintechs have revolutionized financial services with efficient ways to access, alter, and update financial data.

How is FinTech Impacting the Banking Industry?

The advent of FinTech has shaken the banking industry with innovative, user-friendly, and technology-driven banking solutions. FinTech companies are offering convenient and quick services that save time and costs.

For instance, FinTech companies are offering mobile payment services that enable customers to make payments in a few taps on smartphones. So, they don’t have to carry cash or debit/credit cards. FinTech services are quick, easy, and cost-effective, and it makes them attractive over traditional banking channels.

FinTechs create new opportunities for banks that make them more competitive and efficient when it comes to delivering finance and banking services. Further, they can leverage digital technology to save time and minimize the burden on the banking staff.

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The following are the eight game-changing factors that show how FinTech is revolutionizing the banking sector.

• Improved Security
  FinTech software solutions offer enhanced security with the use of biometric authentication, encryption, and other features. So, customers are able to perform transactions easily and securely in digital mode.
• Enhanced Efficiency
  FinTech solutions provide businesses with enhanced efficiency with the use of digital technology. It helps banks manage their operations efficiently with faster processing speed.
• Reduced Costs
  Banks can reduce operational costs using FinTech as it eliminates the need for manual processes and the use of paper in most cases.
• Better Transparency
  FinTech banking solutions offer better control over financial data and improved transparency. It enables customers to track transactions, monitor accounts, and get financial information on the fly.
• Faster Services
  Banks get improved processing capability with FinTech enabling them to offer faster services. For example, customers can make payments quickly because of rapid processing by the bank.
• Enhanced Customer Experience
  FinTech offers new tools and technologies that enhance customer experience with personalized services. In addition, tools like chatbots help in resolving customer issues quickly.
• Improved Accessibility
  Using FinTech technology in banking enables banks to make their services more accessible and convenient. Customers can access banking services anytime, anywhere from their smartphones.

Is FinTech a Threat to the Banking Industry?

There are different opinions about FinTech in banking. While many believe that it will have a positive impact on the banking industry, many others don’t have that kind of outlook. Even some consider it to be a threat to banking. It is somewhat true as FinTech has the potential to disrupt the traditional banking model. However, modern banking is integrated with technology and FinTech is the cornerstone of the banking evolution.

It’s not hard to define the role technology plays in the banking sector today. From ATM machines to net banking, there are countless ways technology is enhancing our banking experience. You don’t spend hours in long queues as it takes a few taps or clicks to send/receive money, check your balance, and get account information. It takes much less time and effort to do banking like transferring or receiving money with FinTech than the traditional banks.

With the increasing market share of FinTech and rising operating costs, there is a significant challenge before traditional banks. However, despite the exponential growth of FinTech, the sector remains smaller in size than the banking sector. While the global market size of FinTech stands at more than US$200 billion dollars, the market volume of traditional banks is above US$4 trillion.

New Technological Evolution in FinTech That’s Reshaping Banking

The rise of new technologies is shaping the future of FinTech that’s going to affect how we do banking. These technological evolutions will lay the foundation for new-age banking services. FinTech companies can offer better value than traditional banks with the use of these technologies. Let’s discuss the top trending technologies in FinTech that will give an edge over traditional banks.

• Blockchain: Use of blockchain in FinTech offers a more transparent and secure method to handle customer data. It is based on the DLT (Distributed Ledger Technology) that makes it secure and reliable. This is how FinTech offers an edge over traditional banks that work on legacy systems that are more susceptible to cybersecurity risks.
• AI and Machine Learning: AI-based chatbots and personalized services are examples of how AI and ML improve the overall customer experience in FinTech banking. It can help avoid long queues, cut service time, and cater to varied customers easily. Traditional banking faces such challenges on the other hand.
• Robotics: RPA (Robotic Process Automation) involves using advanced automation tools that help fintech companies automate many repetitive and mundane tasks. It helps reduce errors and increase the efficiency of the services. The use of RPA can revolutionize traditional banking by eliminating manual processes that are inefficient and labor intensive.

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To Wrap UpWith ongoing digital transformation across different sectors, banking cannot be left behind. Like other sectors, technology has also crept into the banking sector with tremendous uses and benefits. The fusion of technology with banking processes benefits both customers and banking firms.Moreover, if you want to harness the true benefits of digitalization for your finance or banking business, you need to collaborate with the right technology partner like Radixweb. As a partner we will help you build an innovative FinTech solution by guiding you every step of the way.You can leverage our FinTech software development service to create a wide range of solutions for the banking and finance sector. Don’t hesitate to contact us and give us a chance to prove ourselves.