Fintech and Banking- What the Future Holds?
Fintech and Banking share something- a common customer segment. Which one is well positioned for the future? Let’s see!The term “fintech” is actually a new word for financial technology. It has been composed from 2 words; financ- which indicates the finance, and techno- which implies innovation. The term was first coined by the venture capitalist group in 2009. This term was made to depict the main element of any company or business that has changed its operating system for better results than before using technology as the main driving force rather than the human capacity. All these opportunities are available on cloud computing and it is rendering many beneficial effects to both small startups and huge corporations present in every segment like retail banking management, personal finance management etc where peoples can gain fast access to their funds and products without visiting physical branches daily because online services have become fast, effective and highly secure.
The impact of fintech and future of banking on the financial industry is going to be huge in the coming years because it’s an expanding market with rapid growth opportunities for businesses, startups, experts, investors etc. Focusing on these areas can lead to diversifying business portfolios while avoiding major risks like the online frauds that have been increasing further by hackers basically using phishing attacks to lure users into clicking malware-laden links or entering account details at spoof sites. In addition, this journey will also provide a new opportunity for all the entrepreneurs because due to its various functions such as providing quality products and services at low prices (affordable price rates), reducing operational costs (reducing staff costs), having faster transactions and withdrawing/depositing funds, reducing paper work by doing away with the manual records etc. These opportunities will lead to a better economy for every individual.
Some of the main benefits of fintech are that it provides fast services, low-cost products and offers round-the-clock services around the world. Therefore, these factors have brought people from all kinds of banks, backgrounds and customs to participate in this technique which has become more popular than ever before so that they can win their customers’ trust back or at least get some attention towards themselves through providing these facilities to them such as linking bank accounts with social media (Facebook), having mobile payment apps (Zelle) , building virtual communities where users can discuss financial topics about loans, debt management, student loans etc. On the other hand, traditional banking services have changed noticeably as well because it has moved from conventional face-to-face branches to mobile and web applications due to these new emerging services like online music streaming that uses banks’ APIs to connect with users’ bank accounts in order to create a direct relationship between customers and their financial service providers is one of the main reasons for fintech’s increasing popularity through which consumers get access to banking services directly through third party.
An important thing about this technology is that it has made business easier by providing automated software solutions so that companies can freely monitor all their activities such as payment transactions , funds transfers around different locations easily without any issues. This gave birth to the first fintech application in 2009 known as automated clearing house (ACH) that makes use of banking services to transfer funds from one bank account to another bank account.
Accordingly, this technique has gained more popularity among startups because a majority of these companies focus on providing financial services like insurance, online loans and investment management etc with the help of data analytics, machine learning and artificial intelligence software’s so that they can tackle automation issues for their businesses rather than manual processes which were taking too much time. This is why most banks have shown their interests towards acquiring or investing in fintech companies instead of developing new technologies themselves. For example: In 2014, American Express acquired 37% stake on Stripe for $200 million in order to utilize its payment processing services around the world.
One of the biggest advantages of this business strategy is that it has a huge customer base that is increasing rapidly so companies can easily target more customers for their products and services which consequently leads to increase revenues as well. For example: In 2016, PayPal had about 184 million active customers in addition to 17 million merchants while Zelle had 56 million users after only 5 months in its operation (since 2017). That means there are lots of opportunities for companies dealing with financial transactions (e.g loans) by targeting these customers on daily basis or they can even form virtual communities within themselves where investors can invest money through these platforms without any risk because this path will lead them towards new and capacities that allow them to handle these matters on their own.
On the other hand, banks have started using these technologies to improve their business strategies and capabilities as well which resulted in increasing demand for fintech companies such as Ripple that has created a software solution for cross border payments between different banks all across the world . The main benefits of this tool include fast transactions with low fees because it takes only about 3 seconds for each transaction while traditional systems need sometimes more than 10 minutes until they verify one single payment. Moreover, its blockchain technology is beneficial for banks that aim at integrating it into their daily processes because it provides them a secure way of making transactions , especially important ones, throughout the world without having to worry about frauds theft or charge-backs since every transaction is recorded and can not be altered afterwards.
In conclusion, high demand for fintech companies and their products along with banks’ increasing interest towards them can be considered as one of the main reasons for achieving a rapid growth in this industry which is expected to keep growing over time . Thus, I believe that it is necessary to continue doing researches on these companies and technologies in order to introduce new ways for improving financial transactions all around the world.