You may think you’re participating in some revolution when you’re transferring $9 for food to your colleague on Venmo. But since the moment Fintech is launched, the industry has experienced wonders. Whether it is about managing finances or buying coffee at the local cafe, Fintech is everywhere in 2020. The technological concept has gifted many solutions right from PayPal or Venmo to cryptocurrency. Coupled with the latest developments in the financial sector, Fintech has affected startups to large enterprises massively.
Today, in this article, we are going to discuss the impact it has on the financial industry. But, let’s begin with understanding the term called Fintech.
What is Fintech?
Fintech is a combination of finance and technology. Companies avail financial services through technology for facilitating mobile payments to cryptocurrency. Any company that uses mobile devices, internet, cloud services, or software technology for performing financial services falls under the category of fintech. The technique has made inroads with numerous applications and has transformed the way customers access their finances. Fintech has disrupted traditional banking and financial industries. It has posed a threat to conventional brick-and-mortar financial institutions.
Initially, the technology was only known to have been applied to the back-end systems of financial institutions, but now it has grown massively for generating more consumer-focused applications. In 2020, it helps in the management of funds, stocks trading, insurance management, food payments, and much more.
The fintech tool changes the way consumers manage, track, and facilitate finances. People make use of one to three applications for finance management. As per CNBC, investment in fintech raised to 18% in 2017 alone. Around 1.7 billion people worldwide don’t have bank accounts. In such cases, fintech offers a nimble option for accessing financial services without requiring brick-and-mortar.
Still, got doubts about its popularity?
Check out the stats-
- The total transactional value of digital payments is around $4,769,370 million in 2020.
- As per a report by Statista, there are a total of 8,775 fintech startups in America by February 2020.
- In comparison, there are 7385 startups in Europe, Africa, and the Middle East, while there are 4,765 in the Asia Pacific region (by Statista).
In this era where customer satisfaction is most relevant, fintech has forged solutions that better respond to customer requirements in terms of convenience, accessibility, and personalization.
Applications of Fintech in the Finance Industry
1. Omni-Channel User Experience
Digital channels are dominating the way customers are connecting with companies. There is a rapid shift in the user interactions, and financial organizations like banks have moved quickly from the traditional procedures. Now, the branch-based activities are operating wholly in a digitized manner. Omni-channel customer experience helps in meeting consumer demands through social media, mobile, and other messaging channels like live chats, emails, and messages. Facilitating customer communication through multiple channels helps companies in achieving customer-centric operations.
For banking customers, an omnichannel experience implies that the customers experience consistent and seamless online interactions, regardless of the device or network connection. The smart branches smoothly integrate with the digitized services. As there is a shift in users’ behavior, the emergence of fintech helps in migrating transactions and sales to the digital channels. It eventually creates a unified and enhanced customer experience. The fintech startups provide the financial organizations with a facility to integrate multi-channel messaging powered by AI, ML, and other such automation for streamlining communication- a win-win formula to boost customer and sales engagement. In addition to this, co-browsing is another latest technology that can deliver omnichannel support. Beyond credit unions and banks, this tool is also utilized by the agents in lending, financial advising, and insurance for providing in-person assistance.
A primary benefit of co-browsing is that the agents can consider navigating along with the customers and visitors on specific webpages for telling the approach during essential stages of the buyer’s journey- right from filling forms for pre-sale applications to the post-sale customer onboarding.
2. Lending & Asset Management
Fintech is overpassing credits by streamlining the risk assessment, easy accessibility, and speeding up the approval processes. Millions and billions of people around the world can now apply for a loan on their mobile devices. New data points and the better risk models are expanding the credits to the non-affordable populations. Also, customers can request credit reports multiple times of the year without having to shout their score. This will make the whole backend of the lending world much more transparent. Some of the brands that have availed the technology for the same are Petal, Tala, and Credit Karma.
The other major way Fintech is impacting the financial industries is with its data analysis tools that can increase automation, especially in the asset rebalancing. The cloud-based Robo-advisory-enabled platforms leverage these platforms for advising users about asset management and investment.
3. Insurtech Applications
CBInsights reported a fund of $1billion in the Insurance technology sector. Insurance software solutions are a big bonus in this sector as the technology and analytics can avail the data for determining personalized offers and varied prices to specific customers. The Insurtech solutions are developed for analyzing customer patterns based on the custom insurance packages. For instance, when a person is looking for car insurance, the Insurtech app would help in evaluating driving habits based on the suggested payment strategies. Additionally, the Insurtech solutions allow the selection of best insurance policies for every customer.
4. Regtech and Grandtech
What is Regtech?
Regtech is the management of the regulatory procedures within the financial industry with the help of technology. The primary functions of regtech include reporting, regulatory monitoring, and compliance. It majorly comprises a group of companies that avail cloud computing technology through SaaS for helping the businesses effectively comply with regulations. In simple terms, regetch is called regulatory technology. With rapid changes in the business culture, it has become very difficult for numerous industries to compete and still maintain their position within the industry’s regulatory framework. By leveraging machine learning and big data, regtech tools can manage transactions and identify the outliers that are pointing towards some fraudulent activity. By identifying the potential threats in real-time, data breaches can be addressed, and eventually, the risks can be minimized.
When the Fintech companies always have focused on Millennials, some innovating organizations in the market have created protections for looking after the grandparents and great-grandparents who are generally considered financially vulnerable. The entrants, like SilverBills, in combination with Eversafe, easily administer the fragmented processes of managing the senior citizens’ monthly bills. By linking it with the senior’s different financial accounts to the service, the software can understand their behaviors and send alerts when it spots something unusual like 3 am visits to the ATM.
5. Goes Beyond the Blockchain
Following up the innovations, the financial industry offers an approach in the arena of Blockchain. For the past few years, cryptocurrencies have been disrupting the banking industry. It provides cheaper and quicker ways of completing transactions. This wave is still to affect the industry to analyze in the long-term. But, it’s noteworthy how it’s going to be implemented and reshaped the way for payment transactions. Blockchain offers a robust platform for trading with improved transparency, and customers can benefit from the cryptocurrencies for reducing costs, transferring money, and saving time.
6. A Win-Win Partnership
Competition between new entrants and banks in the financial industry paves the way of the way for direct collaboration through the Fintech ecosystem. In such cases, all the parties look equally profitable. The potential opportunities extend from product development by the new entrants to the distribution capabilities by banks. The advanced implementation of Fintech applications allows the companies to approach the customer needs more holistically while forging solutions without losing sight of their revenue streams and core offerings.
Future of Fintech
While the advancements in the arena of Fintech applications are occurring with lightning speed, we just have scratched the upper surface for estimating the happenings. It won’t be an exaggeration to claim that the Fintech applications are transforming the financial behaviors. It is easy to trade, bank, and exchange money without requiring any physical interactions. Although, the finance industry has a couple of challenges to overcome, especially in the data protection and regulation space for obtaining customers’ trust. With blockchain, big data, AI, ML, and so many other cutting edge technologies on the horizon, business leaders are advised to embrace Fintech culture in their business models.
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