Innovation in fintech braces the banking industry
Technology has become an inseparable element in every aspect, and it is quite difficult to think of doing a business without making a noteworthy reference to technology. Giving a way to the traditional mechanisms of the business, the use of current technology has helped businesses grow at a faster rate.
Technology has revolutionized the way companies conduct business and working has become very easy and simplified today. It has replaced the outdated systems of traditional banks, improved transaction processes, escalated efficiency, and strengthened financial institutions. The increased preference and growing investments in the fintech sector have put the banking industry towards the top of the list when it comes to adopting new technologies.
Traditional Banking vs. Fintech
Fintech has changed and evolved over years to fit with the feed of the customers and its place in the public conscience has really taken off in the past few years. With growing consumer expectations and heightened security concerns, interest in the fintech sector is at an all-time high. Traditional banking poses fundamental problems like constraint of place, non-availability of 24×7 services, and is time consuming and lengthy, and all these problems which were created by the traditional banking sectors are today being solved by the fintech sector at ease.
Fintech companies identify customer needs and aim to protect users from hidden charges. Be it money transfer, taking a loan and insurance, or simply creating and managing a bank account, fintech is largely benefiting the banking sectors today. Fintech is automating the major fraction of the banking processes, adding speed, displaying transparency, and assuring security to the transaction processes.
The fintech sector has laid a strong foundation and with each passing day, newer business models and use cases are emerging, which are largely strengthening the sector. The Indian fintech ecosystem has witnessed a plethora of innovations over the last decade.
Initially, the first wave of disruption in the financial services sector was escorted by the concept of digital payments which was followed by digital lending and wealth management startups. The continuous advancement has now led to the emergence of fintech 2.0, where there are new concepts and product offerings emerging with completely different and unique models.
The disruption of the financial services sector by fintech innovations has revolutionized the way in which financial services work today. Hyper personalization of products, innovative payment ecosystems, rise in acceptance of Artificial Intelligence (AI), Internet of Things, and cost of compliance, are few of the key drivers which are replacing the traditional financial services sector.
Role of AI
Banks are using AI to accomplish a variety of tasks already today to enhance consumer experiences and reduce the operating costs. AI is helping the banks predict the future outcomes and trends, to identify and detect fraud and give worthy real time recommendations to customers.
AI is generating growth through both improved customer and employee experiences. Continuous rise in cybercrime and fraud has evoked the banks to strengthen and nourish their digital security infrastructure.
Different from traditional lenders, fintech allows customers to assess the creditworthiness of borrowers through alternative data. Non-banks and alternative lenders have garnered attention. It provides easy and affordable loans to small businesses, startups, SMBs housing loans, car loans, etc.
Products and Services
Customers today need the right individual experience through the right channel at the right time. Today, fintechs are providing hyper personalized products, which helps gain insight into customer preferences in order to offer tailored products and experiences, and helps to address customer pain point.
Real-Time Payments the New Game-Changer
Fintechs have made payments flexible, fast, and cheap, all by the support of high technologies, AI, Machine Learning, and IoT. Technology has always been an enabler and change driver of financial institutions’ success. Due to the ever-increasing customer demands and expectations, the payment landscape is witnessing a massive remodelling and innovation in order to survive in such an intense scenario.
Slowly and steadily, neo banks are disrupting the financial services sector and as technological innovations and digitalization are reaching new heights, consumers are slowly switching over to digital banking. According to the MEDICI India Fintech Report 2020, in partnership with FCC of IAMAI, the second wave of disruption in the Indian fintech ecosystem is led by neo banks and the report also stated that with fintech segments like payments and digital lending getting overcrowded, investors’ interest has shifted towards neo banking.
It is no exaggeration to say that fintech is literally transforming our lives and habits by making the financial services easy, transparent, cost effective and time saving. Technological innovation is dramatically transforming the financial services industry and benefiting the society. Fintech has forced banks to rethink their model of service delivery and administration and hence, collaboration with the right fintech organization will prove to be a boon for the banking sector.