How FinTechs are shaping the financial service industry | HCL Blogs

How FinTechs are shaping the financial services industry

How FinTechs are shaping the financial services industry
October 30, 2017

Co-authored by: Atheesh Kasaragod

FinTechs make use of new technology and innovation to develop new and better financial services for both FinTech companies and the end users. They cater to personal financial management, insurance, payment, asset management, lending, digital payments etc.

FinTech as an industry creates new applications, processes, products or business models in the financial services industry.

Financial technology—FINTECH explains the combination of financial services with the evolving technology.

FinTechs are exploiting the gap between the financial services and technology. Increasing use of technology for financial services have led to disruption in the traditional financial services. We can see this change from the way traditional banks are adopting to the new change with their own innovative financial products and instruments.

These FinTech firms have been a blessing to small-scale businesses. Some of the innovative solutions they offer to the small-scale businesses are the following

  • Marketplace (peer –to- peer) lending,
  • Merchant and e-commerce finance,
  • Invoice finance,
  • Online supply chain finance and
  • Online trade finance.

They have improved the way payment processing is done. The figure below shows the major technologies used.

Fintech

Figure 1Key Technologies used in FInTech

Services FinTechs caters to:

  • Savings and investments
  • Funds transfer and payments
  • Lending
  • Insurance

Fintech services include marketplace platforms for investments, online investment advice, budgeting and financial planning and online trading. Some of the firms that are prominent in this space include Mint and betterment.

In the Funds transfer and payments area, services like B2B and B2C funds transfers by non-banks as well as online foreign exchange and overseas remittances are the major areas of importance. Venmo and Square are among the major players in this domain.

Lending space players include OnDeck and LendingClub, which are marketplace lenders and peer-to-peer lending platforms.

Services like health and car insurance aggregators the use information technology to lower premiums are covered by the fintech companies. Esurance is one of the major players in this area.

One way or the other these fintech companies have directly or indirectly have become a larger threat to, other well established financial institutions. It is high time for these financial institutions to think fintech as an opportunity rather than considering them as threats.

Fintech

Figure 2 Fintech Evolution

The figure shows how fintech has evolved though years. It shows how much impact it has had on the financial sector since its inception.

The main reason behind the declaration of FinTech companies may well lie with the expanding omnipresence of smart gadgets.

Given the expanding utilization of brilliant gadgets and different contactless installment strategies to finish exchanges, business to customer development appears a characteristic course for the FinTech business. In reality, as innovation and shopper tastes keep on evolving, the market for money related administrations must keep pace, and figure out how to advance. Online installment organizations, for example, PayPal made a tremendous sprinkle in the 2000s and constrained associations to change the way they saw buyer installments.

A Happy Customer

The continuous evolving of Fintech startups covers a wide variety of audiences, markets, services and technologies. It is giving the consumers greater accessibility, efficient secure payments, better banking experience.

From the consumer prospective, there are many innovative methods coming up in payments as the technology is changing at a quick pace. Much innovation is still dependent on the traditional financial infrastructure.

Much innovation is still dependent on the traditional financial infrastructure.

How are the incumbents being impacted?

Traditional banks are aware of their inefficiencies, slow processes and high fixed costs. This rigidity is because of heavy regulations and strict security requirements. Technology exposes them to a risk of being hacked.

The demise of bank branches was on the cards since the 1990’s, as the internet continues to reach farther into our lives. However, we are nowhere close to a branch-less banking world today.

Banks and Fintechs can collaborate to leverage their competencies. Banks can benefit by utilizing the fintech firm’s agility, innovation and technical expertise. Fintech firms will get the bank’s advantage of scale, stability, trust and access to capital and funding.

Banks can benefit by utilizing the fintech firm’s agility, innovation and technical expertise.

Where are we heading to?

Overall, Fintech is helping the business, banks, customers and economy in risk management. Because of the improved supply, new and innovative products, customized offers to individual requirements, new markets can be captured.

In this fast-paced world, Fintech has become an integral part of the financial services. This can be a fear, or touted as a solution for everything related to financial services. When there is a potential to change, business transition needs complete care or else you might end up on the losing side.

This disruptive technology will have a genuine impact on the value chain, streamlining the processes and improving the customer service.

Fintech innovations are helping the consumers to understand their financial needs and access their choice.

References

https://www.veriday.com/the-evolution-of-fintech-infographic/

https://www.whitlockco.com/fintech-and-your-bank/

https://www.business.com/articles/how-fintech-is-changing-business-and-bank-accounts/

https://www.financierworldwide.com/the-disruptive-influence-of-fintech/#.WYW7TNSGPtS

http://bitcoinist.com/fintech-impact-consumer-behavior-mobile-payments/