Financial technology, or FinTech, has already begun to transform banking. According to one industry forecast, India’s FinTech business would rise to $150 billion in the next five years. FinTech has caused a fundamental shift in the financial services industry, putting the client at the center of everything. With banks going to digitalization, FinTech is reinventing the whole banking landscape.
FinTech has advanced this by making them paperless and cashless. “In today’s world, all banks operate in a totally automated setting.” While banks were able to improve automation levels, the distinction that FinTech has brought is that it has helped reinvent how financial services are presented to end-users.
The emergence of fintech has changed the banking sector to a whole new level. To cater to your understanding, we have described how fintech is affecting the banking sector.
What Changes Did FinTech Bring to Banks?
People’s attitudes about fintech banking and financial services are shifting as a result of new technology. In contrast to earlier instances of increased competition in the banking business, alternatives are currently growing much too rapidly.
Fintech has brought about significant developments in the financial sector. It consists of smart chip technology, biometric sensors, internet transactions, mobile banking, chatbots, AI, and much more.
Another aspect of fintech in banking is digital payment or transactions. It makes fundamental tasks such as making payments and obtaining financial services much more convenient. FinTech is no longer a banking industry buzzword. Instead, it has become a common phrase in the field of technology in general.
Fintech is transforming the traditional financial industry and is one of the fastest-growing industries at the convergence of financial services and cutting-edge technology.
How FinTech is Affecting the Banking Sector?
Cloud Banking :
Cloud banking is a very effective deployment and delivery methodology. It helps financial organizations to manage basic banking platforms and cloud-based applications. It is critical for the success of banks to use the appropriate tools and processes. Cloud technologies provide data access without the need for specific software to be installed on the device.
It allows banks to sell their goods anywhere in the globe by centralizing services on the network. Big data, in turn, provides clients with personalized offers based on the analysis of diverse and rapidly changing digital information, the sources of which include the Internet, corporate document archives, sensor and device readings, and so on.
Mobile Banking :
The increased usage of smartphones has compelled banks to develop mobile applications that provide easy FinTech financial services. Most banks now feature a mobile application with a user-friendly UI. Banks have also developed smartphone applications that identify the user’s fingerprints.
This function is carried out by the application without the need for any biometric app or hardware. A mobile application allows you to access cash quickly. A mobile application allows the user to execute a variety of banking operations, including rapid bill pay, check deposit, account balance, statements, and many more.
Providing Solutions Online Via Chatbot :
FinTech companies have also developed customer care chatbots, which have recently gained popularity. Chatbots are just pieces of software that employ machine learning and natural language processing to continuously learn from human interaction.
Chatbots are extremely efficient since they automate customer interactions such as inquiry answering and delivering consumers to the appropriate departments. Chatbots have become an essential aspect of all banks since they not only save costs and improve customer happiness but also allow call center operators to focus on value addition.
Digital Payment :
Digital payments are payments made through digital or online channels that do not entail the exchange of actual currency. This type of payment, also known as an electronic payment (e-payment), is the transfer of value from one payment account to another in which both the payer and the payee utilize a digital device such as a mobile phone, computer, credit, debit, or prepaid card.
To make a digital payment, both the payer and the payee must have a bank account, an online banking method, a device from which to make the payment, and a medium of transmission, which means they must have signed up to a payment provider or an intermediary such as a bank or a service provider.
Smart Chip Technology :
Smart chip ATM cards have greatly reduced the financial losses that occur in the event of a disaster. It has EMV technology incorporated into the chip. For each transaction, this system employs a one-time password. This strengthens security since the code is only valid for one transaction; thus, even if someone steals it, he will be unable to accomplish anything.
To minimize extra problems and troubles, bank employees often urge their customers to memorize their pins. Bankers are always seeking new methods to prevent theft and fraud by delivering superior protection to their consumers. When opposed to smart chip technology, magnetic stripe technology utilizes the same pin for all transactions, making it more vulnerable to fraud.
Decrease in Physical Bank Branches :
FinTech financial services are shifting the whole banking system away from branch-specific processes and toward diverse digital channels such as the internet, social, and mobile. It also decreases the bank’s need for physical branches to function. As a result, several banks are lowering the number of branches by implementing omnichannel banking.
A shift in financial transactions to the internet and mobile devices also led to the demise of commercial banking firms. As a result, small banks with local branches where citizens knew their tellers or small company owners had a relationship with a loan office declined in communities.
Another evidence of the expansion of FinTech financial services is the enormous increase of E-wallets. PayTM, PayPal, Google Pay, and Apple Pay are some of the world’s largest e-wallet firms. These wallets are used for a variety of applications, including peer-to-peer payments, utility bill top-ups, foreign transfers, ticket booking, and many others.
Starbucks and Walmart Pay are two examples of stand-alone wallets. E-wallets have attracted consumers because of their enticing services, which include thrilling deals, generous cash back, and reward points, among other things. Because of their enormous success, many banks are increasingly recognizing the value of e-wallets and acknowledging them as a collaborative approach to embracing technology changes.
Fintech is a complex system that connects the sectors of new technology and financial services, as well as start-ups and the related infrastructure. The financial services industry is progressively utilizing new technology and tools to accomplish its tasks and develop fundamentally new solutions that customers are interested in. Fintech’s high-end security and user-friendly features have had a significant beneficial impact on the banking industry.
It has made banking considerably easier, safer, and more dependable, all at the tip of your finger. The influence of fintech on banking and the impact of fintech on financial services provides a boost to the banking sector’s development. Despite the contrasts and limitations, fintech startups and banks may profit from collaboration. Recently, many more banks have started adopting fintech technologies to switch and transform from their traditional way of banking.