The financial services industry has had a bumpy ride in the past few years, what with the financial crisis and the fallout that followed, and the lull that still exists in this sector. Regulatory scrutiny is one of the biggest challenges facing this sector. In an environment where banks have been hit by sanctions, and are facing major trust issues, it is necessary for the sector to undergo a transformation both culturally and structurally. It is at this point that fintechs leveraged the opportunity, and transformed traditional banking, thus offering better services to both businesses and customers. Fintechs are creating alternatives to traditional methods of banking and payment. Newer tools and services are being created to disrupt the existing financial systems, and create a more user-friendly environment for this sector.
Read on to understand the fintech revolution, and how it has transformed financial services
The Fintech Revolution
Fintechs are basically financial service firms that build products/services based on technology. They have the first-mover advantage, and have innovated the entire sector to build more responsible and creative products to unleash opportunities for businesses and customers. This is a revolution, and it is definitely here to stay. Since, 2008 the investment in this segment has increased from $928Mn to $2.97 Bn, and it is predicted that it will reach $8 Bn by 2018. Some of the major reasons for increasing number of Fintechs could be attributed to the gaps that exist in the current finance and banking system, and the lack of trust that exists among the consumers. The reason for embracing technology could also be attributed to the way Internet allows us to interact with finances, and the way Internet has made banking user-friendly.
While banks had resisted this change for long, they can no more do that as this new transparent and user-friendly system is being embraced by the users. The new fintechs possess no hidden fees or obscure charges, which makes them transparent, and allows easy credit, exchange and debit of money. From money transfer to equity lending, the fintechs are virtually everywhere. Fintechs can alter the way you have been assessing risks, and the pricing for finance products. They are responsible for the augmented operational efficiency, and can reduce the entry barriers, which is also why organizations are growing profitable.
Future of Fintech& Finance Sector
In the wake of fintechs taking over the financial sector, banking and finance industry is reimaging themselves to close the gaps that exist in the system. While fintechs started out as competition and threat to the banking industry, currently they have collaborated to redefine the experience of the customers in this industry. With emerging technologies taking over the financial sector, and the collaboration of cloud, social, analytics and mobile, the traditional banking has been replaced with more refined and tech-based banking services and products.
Financial institutions, owing to the transparency and the scalability offered by fintechs, have started embracing them. At the same time, there is a growing need for collaboration as the fintechs cannot grow and scale of their own, owing to the US regulatory environment.
So, the banking and finance industry will move from being competitive to collaborative with the fintechs. To accomplish this collaboration, certain strategies and themes have been laid out, which will help in accelerating the transformation, thus creating an alternate to traditional banking systems.
Let’s see how banking industry will reimagine for a smooth collaboration with fintechs
Strategies for Innovation
● Short-term: Banks will look at adopting tactical themes to improve their business models and innovate the core. For this, the industry is looking to adopt emerging technologies, and change the mainframe to more adoptable technologies
● Long-term: In a few years, banking industry is looking at embedding customer-centric insights to their core, and make digital the core of banking. They will start looking at hiring the right skills and technology to improve banking technology. Expansion will help fintech and banking industry collaboration, thus creating the apt ecosystem for the customers. More relevant business models and themes apt for the customers will become the focus of the long term strategies
To ensure smooth transition from traditional to digital, the banking sector will opt for openness and collaboration. Open innovation will be core to the digital transformation, wherein external technology solutions, knowledge capital and the resources will be engaged with the assets and expertise of the organization to create new ideas, redefine the existing structure, identify opportunities and make the enterprise scalable. The idea is to build a more flexible and scalable ecosystem. The financial services officials have, in the past, collaborated with the non-core services to reduce costs and unleash the opportunities within the sector. In this case, the collaboration will occur between financial institutions and the fintech products to create new revenue models, and new opportunities to increase profits.
Silver Touch has developed fintech products and services that aim to transform the finance and banking sector. Our Banking IT Solutions for Online & Internet Banking Services aim to improve the traditional systems, collaborate with the existing system with fintech products, and help the sector survive in the fintech era. We match our products to meet the demands of the fourth industrial revolution that is aimed at banking and finance sector majorly.
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