While FinTech offers numerous exciting potential, institutions or traditional banks are also dealing with the issues that it entails. How is fintech affecting traditional banking? And will fintech startups replace banks in 2021? We will answer those questions in this article.
From 2015 to 2020, there has been an incredible increase in the number of new FinTech start-ups, particularly in the digital payments, lending, and wealth sectors.
While FinTech offers numerous exciting potential, institutions or traditional banks are also dealing with the issues that it entails.
How is fintech affecting traditional banking? And will fintech startups replace banks in 2021? We will answer those questions in this article.
WHAT IS FINTECH?
Banking, investment, trading, cryptocurrencies, and many other financial sectors have been greatly impacted by the convergence of finance and technology... As a result of this, the word Fintech has gained in prominence.
Fintech stands for financial technology. Not only does it apply to a specific type of technology, but also to a broad range of technological developments that have fundamentally altered the way financial services are provided in the traditional sense.
Innovative financial products and services can be created using fintech and the newest technological breakthroughs. Fintech innovations such as banking software and banking apps have had a significant impact on the financial industry.
HOW IS FINTECH AFFECTING TRADITIONAL BANKING?
Fintech uses modern technology such as artificial intelligence, big data, and cloud computing to provide customers with a one-of-a-kind experience. It prioritizes seamless delivery, customisation, speed, and relevance.
Furthermore, because of their more efficient business structures, fintech firms can offer products and services that are up to ten times less expensive than traditional banks.
Banks' capacity to use new technologies is hampered by old systems and regulatory frameworks. As a result, banks are unable to launch new services or products that meet client wants or difficulties at the same rate as fintech firms. Banks, on average, are more process-oriented than fintech.
To open an account or apply for financial services, most banks require you to be physically present. Not every bank has the technology to validate your identification online. As a result, traditional banking becomes less convenient for consumers, resulting in an unhappy experience.
WILL FINTECH STARTUPS REPLACE TRADITIONAL BANKS IN 2021?
Banks and fintech startups share the role of financial intermediaries. In spite of the fact that banks have been in business for hundreds of years, they must undergo fundamental transformations in order to fulfill the needs of today's consumers.
Technically, fintechs provide users with more advanced capabilities and practically all of the same services that traditional banks offer.
This topic has remained controversial due to the fact that customers have different expectations and requirements when using banking services.
Some would say that it’s unlikely that fintech startups replace traditional banks anytime soon. Most of this is due to the consumer's continued reliance on banks for safekeeping their money. Due to decades of client connections, banks have created a level of trust that fintech companies will have to be more patient to gain this trust over time.
However, in this current situation, pandemic may have played a role in the digital change we saw in 2020. As a result, Fintech Magazine predicts that convenience, inclusivity, and sustainability will be the focus in 2021. This means that financial technology or fintech, will continue to grow this year and become more beneficial in the future.
