Fintech Revolutionized Rather Than Disrupted Financial Service Industries

fintech innovatorsFinancial technology was initially introduced as a computerized back-end system that banks used as support in the processing of financial transactions. However, developers of financial technology or fintechs, as they came to be known, gave more focus on developing computerized financial processing systems to expedite the delivery of financial services and products to consumers.

Fintechs Were Initially Viewed as Disruptors

At first, fintechs were viewed as disruptions in the financial sector because they adversely affected the traditional operations of the banking industry. Yet in order to survive and thrive, banks and other financial institutions adopted innovative technological advancements provided by fintechs.

Doing so enabled them to offer online payment and investment solutions that were 10 times faster and more convenient than the conventional methods.

Collaboration Between Fintechs and Financial Services Industry

The newfound collaboration between fintechs and banks, insurance companies and users of e-commerce platforms, gave consumers access to user-friendly online banking systems and mobile applications that made it possible for them to make real-time payments, fund transfers, avail credit facilities, place investments, perform wealth management and other financial transactions.

data analyticsOn the other hand, banks and the industries that have adopted fintech solutions, were able to gain access to data analytics that gave them the capability to operate with increased efficiency.

Moreover, the powerful analytical tools that form part of fintech innovations provided users with valuable customer insights that helped them better understand their respective clients and their needs.

Neobanks : Entirely Digital Technology-Based Financial Services

Fintech innovations gave rise to neobanks that can render faster and more accurate financial services without the need to have a physical location like traditional banks. The concept and operations of neobanks first originated in Germany and the United Kingdom; providing mobile-first, digital financial services such as facilitating online payments, money transfers and loans, just to mention a few.
Operating entirely on digital technology supported by mobile phone applications, neobanks manage end-to-end client servicing and customer acquisition. A banking partner keeps and safeguards the funds of neobank customers, while also giving access to funds that the digital banks can offer as loans to clients.

Pros and Cons of Banking with Tech-Based Neobanks

While many regard neobanks as better than conventional banks, there are also concerns and constraints faced by neobank users.
As an innovative banking solution, neobanks’ automated services allow smoother and faster response time in the processing of financial transactions. At the same time, through the User Interface (UI) it eliminates the costs of having to personally and physically visit a traditional brick and mortar bank. Still, the downside of choosing to use neobanks to handle one’s financial transactions is the absence of a regulatory banking licence that ensures consumer protection. At the same time, arranging and processing financial transactions entirely online pose risks of encountering cyber attacks and vulnerability to system malfunctions.

Technology Trends Driving The Finance Industry

New technologies have long defined the future of the banking sector. The biggest challenge is figuring out which of these developments will be most relevant to a particular company. We are at a crucial turning point. The observation of technology trends in the financial industry has never been more important. The strong competition from fintech companies and high-tech giants has increased consumer expectations within the industry. Since then, banks and credit unions have invested heavily in the use of new technologies to develop successful future strategies.

Technology trends in financial services

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Machine learning in the financial industry

Many banks are faced with the immense problem of keeping up with fintechs, as they can usually adapt to changes much faster and more agile than the big financial institutions. On the other hand, the established banks have more experience and data that they can use. This means that banks can reduce costs, deepen customer relationships and make compliance more efficient by using powerful AI and machine learning. Numerous financial institutions are now using machine learning to optimize all work processes (from risk analysis and fraud detection to marketing) in order to make data-driven decisions.

Cloud-based service models

The demand for cloud-based solutions is increasing. The near future promises cloud infrastructure as a standard web server environment and as a go-to environment for companies, also to accelerate digitalization in the banking sector. Cloud-based service models offer a realistic way to increase your own value creation potential and reduce complexity and costs. Banks are already using Amazon Web Services and other well-known cloud providers for efficient email management, human resources, software development and testing, customer relationship management and other tasks. Even if these are not directly related to the core business of banks, many shareholders assume that it will not be too long before almost all financial institutions will use the cloud for their basic services.

Open Banking

The concept of open banking for financial services is based on several principles:

  • Introduction of open APIs (Application Programming Interfaces) with which external developers can develop applications and services for financial institutions
  • Faster, simpler and more efficient financial services for customers
  • The implementation of these principles through the application of open source technologies
  • Data sharing is usually done through an API, an intelligent connection that enables the data flow between systems.

APIs can implement the formatting of the data derived from a software application in order to insert it unchanged into the next application.

What does this mean for the consumer? Open banking allows account holders to switch from one provider to another much easier to get the best conditions.

Intelligent anti-fraud solutions

The challenges of cyber security have become an everyday struggle for banks. Research shows a clear increase in hacked and publicly available data coming from common sources such as mobile devices and IoT devices.

Cyber attacks are nothing new to banks. An increase in attacks suggests that conventional solutions are no longer sufficient. Analysis technologies are becoming more and more precise in identifying areas and activities where there is an increased risk. Banks that succeed in detecting fraudulent transactions or cyber attacks will also be able to build more trusting relationships with their customers in the long term.

Voice Banking

Intelligent voice interfaces enable real-time communication and interaction between human users and a virtual assistant. This makes it easier to use hands-free devices and to respond quickly to questions and problems. Market leaders in private and mobile consumption include Siri, Cortana, Alexa and Google Assistant. Voice banking in particular is a perfect solution for older and restricted customers to avoid complications on the way to a local bank. Top fintech companies are increasingly developing APIs that voice assistants can skillfully integrate into banking systems to drive efficient voice banking.

Digital Banking

The digital bank is no longer a vision of the future. More and more financial institutions are replacing their physical branches with purely digital offers, thus meeting the requirements for new customer communication. This must be fast, interactive, personal and available everywhere. This turns into a risk that traditional banks have successfully relied on for decades. Financial institutions should therefore also develop efficient startup relationship management programs in order to use the technical know-how of fintechs for the development of digital solutions.

Finance has created more innovative products and services than ever before. In order to keep up with the agile pace and discover competitive advantages at an early stage, banks should continuously monitor their corporate environment and examine them for risks and opportunities.

Moving The Personal Loan Market Upward Through Fintech

Most people around the globe look into taking out a loan for different intents. Some loan for business startup or operation costs, some for educational purposes, for paying off debts, or for other personal use. At times, people take out a loan because of insufficient funds to settle expenditures that are unforeseen. The American Pride Legal Funding, for instance, offer loans for vehicular accident settlement. People do find such loans quite beneficial.

In fact, the market on personal loans has attained a record high in 2018, as the promising industry of financial technology has made financial services through mobile apps more convenient and accessible to consumers.

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The Growing Fintech Companies 

As per data by TransUnion and reported on CNBC, the market on personal loan has gone up to 138 billion US dollars in 2018, an increase of 17% year over year. Lending through fintech comprises 38% of personal loans altogether, an increase from only 5% in 2013. This indicates that fintech companies are growing.

By means of making use of innovative techs, companies of fintech are providing modified or tailored products that are low-cost, which brings about a considerable bearing on the increasing expectations of customers, together with the intensifying pressure on firms that are traditional.

The Department of Treasury of the United States issued a report in July wherein it states that over 3,300 companies of fintech began from 2010 to 2018 wherein investments in these fintech startups are speedily growing. Fintech companies’ worldwide investments in 2017 arrive at 22 billion US dollars. Fintech companies are the major mover of the growth of the market of personal loan.

Debt in the American Household

Many Americans are buried in debt, with increasingly more individuals incapable of settling them. Debt on student loan in 2018 arrived at a new high of 1.5 trillion US dollars; next to it is debt on auto loan at 1.1 trillion US dollars, and debt on credit card at 977 billion US dollars. As per Forbes, the average sum of debt that an American household has is 133,568 US dollars.

For individuals borrowing loans that are subprime, either due to poor credit score/history or low-income, the dangers are the greatest in the event of an economic crisis or collapse. As reported by TransUnion, these borrowers, who put their occupations or work hours on the line is likewise rising rapidly at 4.3% year over year.

Technology-based Solutions

The high utilization of mobile devices as well as solutions that are technology-based is driving the need for banking and financial solutions, wherein personal mobile devices are used to access such solutions. Because of this, financial institutions and companies are greatly capitalizing in solutions that are technology-based to measure up with modern companies of fintech.

A vast majority of worldwide banks, investment managers, as well as insurers are intending to collaborate and partner with companies of fintech through the next three to five years, and are expecting to have an average of 20% ROI on their ventures.

The Unceasing Growth And Development Of Financial Technology

Whether its shopping for new clothes, buying a meal or coffee at your local café, or taking out a loan on lending platforms like www.xn--forbruksln-95a.com/, financial technology or popularly known as fintech is now universally used.

Fintech has been utilized and applied onto numerous of the latest developments in technology such as payment applications or gateways, lending platforms as well as digital currency.

Merging the newest developments in tech with financial applications and services, fintech has aided and assisted many companies and businesses to provide and deliver financial services that are better and more reliable to consumers and other businesses and companies as well.

What is Fintech?

A portmanteau of the words financial and technology, fintech is utilized to describe an industry incorporating and embracing the use of any form of technology for financial services or management, including applications for mobile payment, peer-to-peer platforms, insurance and investment as well as cryptocurrency to name some.

Fintech, in general, refers to any business or company making use of the internet, computer, mobile or other electronic devices, cloud or software technology to connect and carry out any financial services. Numerous products on fintech are intended to connect the finances of consumers with technology for convenience and ease of use and access, though the word is applied to technologies in the B2B sector as well.

Initially described as technology used in the back-end systems of financial institutions like banks, fintech are now more focused on the consumer. At present, because of the developments in fintech, managing finances, trading in stocks, paying for commodities via this technology is now possible.   

As per data from 2016, individuals utilize one to three applications to manage their funds. And as per CNBC, in 2017 alone, investments on fintech shoot up to 18%.

Fintech also cater to the estimated 2 billion individuals without bank accounts globally by providing a smart alternative to take part in financial services that don’t need any brick-and-mortar. Through technology that is user-friendly, fintech then allows consumers to access directly their financial lives.

How is Fintech Used?

So how is fintech used? Here are few examples:

Platforms for Crowdfunding

Crowdfunding platforms permit users to either receive or send money to others. Moreover, these crowdfunding have given businesses as well as individuals to pool finance from a multiplicity of sources in the same platform. Rather than taking out a loan from a bank the traditional way, it is nowadays possible to directly reach out to investors for funding of a project or venture.

Mobile Payments

This generally refers to payment services done over a smartphone or mobile device and works under financial regulation. As an alternative to cash, credit cards or cheque, consumers could now make use of technologies on mobile payments to pay for an extensive array of services as well as commodities.

Budgeting Applications

In 2019, the most widely used fintech technology that consumers use is budgeting apps wherein over the years has exponentially increased in popularity. There was a time when consumers had to make their own outline and template to manage and keep track of their finance. With fintech developing tools and apps for budgeting, with fintech, consumers could now effortlessly as well as efficiently manage and monitor their income, expenses and savings.