How Fintech is Shaping The Future of Banking

The continuing advancements in financial technology (fintech) are impacting several industries. ​​​At its core, fintech uses software to help companies, owners, and their customers manage their financial processes. 

Fintech is still in its early stages of development, but already is disrupting the fundraising, investing, banking, and education industries. With little doubt, banks will experience the most significant impact.

In this article, we’ll explain how financial technology is influencing the future of the banking industry.

What is the future of banking?

The future of banking isn’t certain, but we will surely see significant changes in the coming years. If traditional banking institutions want to survive and grow in the future, they will need to implement new technology. That can including developing better mobile apps and using the solutions that fintech offers. 

Fintech gives banks the ability to offer better services to their customers.

Experts are saying that the future of banking will be purposeful, customer-centric, and data-driven. So, what does that look like for you?

A purposeful bank will focus on issues bigger than themselves. Consumers widely support companies that show their support for social issues that they see as important, whether that’s taking steps to become more environmentally friendly or addressing current social and economic problems.

A customer-centric bank understands and meets its customers changing needs. People want their banking to be quick, safe, and straightforward. Listening to their customer’s desires and engaging with them on a personal level will help.  

Banks that are data-driven will provide solutions for their customers based on the facts. Banks can use real data to offer their customers the best solution possible, similar to how social media networks use data to give everyone a personalized feed of content. 

Fintech customer service and experience

Customers' wants and needs have forced the banking industry to look for quick and flexible solutions. Customers are moving towards financial solutions that offer a seamless experience, easier access to their info, and increased security. 

Compared to traditional banking, fintech innovations will provide solutions that give consumers a better experience. 

Easier access: The worldwide economy can make it difficult to interact with your bank. For example, if you’re traveling somewhere your local bank isn’t located, it can be difficult to take out cash or process a transaction. And if you’re working with someone from a different country, banks can limit your financial transactions. Few banking systems allow customers to pay and receive payments from anyone in the world conveniently. Blockchain technology enables users to interact with anyone who has an internet connection and mobile phone.

Faster transactions: The future of banking will be near-instantaneous. Consumers will no longer be waiting 24-48 hours for transactions to be recorded. Traditional financial institutions are limited by set business hours. That leaves people waiting for their check to deposit and waiting even longer if there’s a holiday when banks are closed. Since technology is running 24/7/365, the days of waiting are quickly coming to an end.

Data security: People around the world are concerned about the safety of their personal information and the privacy of their online activity. Overall, online banking trust has increased, but people need assurance that their identity and money are safe. Fintech’s use of blockchain technology has helped in this area. Using blockchain to build financial tools offers an unmatched level of security. 

Low cost personal financial management

Tasks that we previously needed a financial advisor for are now being handled by technology. Fintech is granting people all over the world access to remote financial solutions. Instead of going into an office to set up an investment account, or a new savings account, you can do it right on your smartphone. And instead of withdrawing cash to pay your friend, you can instantly send it to them.

We see new financial management tools that are both easier to use and less expensive. People rarely need to walk into a bank or talk with a human. Nearly everything we need to do can be done online. 

Financial apps can quickly connect to a user’s bank accounts and help them create a budget, track expenses, move money between accounts, and much more. And many of these tools are completely free. 

Robo-advisors offer investment advice that’s based on data and algorithms. Instead of paying for a financial advisor, customers can pay a fraction of the price for a very similar service. The Robo-advisor industry now has trillions of dollars in assets under management and is on track to keep growing at a rapid rate. The average human financial advisor charges 1-2% of your portfolio, while a Robo-advisor charges 0.4-0.5%. The customer service provided by Robo-advisors is limited, but the savings and convenience seem to be well worth the sacrifice. 

Online-only banks can reduce fees and provide better interest rates because they have fewer expenses. They are paying fewer employee salaries and avoiding the costs of building rent or maintenance. 

For traditional banks, this means they need to adapt. They have two options: to cut their expenses or offer services that only a human can do. Even though it’s less expensive, not everyone wants to deal with algorithms. 

Final thoughts

Most financial analysts don’t expect to see the complete destruction of the banking systems that we know, but they are paying attention to the impacts of fintech.

Fintech will continue to impact the financial industry for years to come. For many years banks faced very little competition or differentiation. They did what was working and provided little to no variety in their solutions. Now the new fintech solutions are forcing banks into competition, and they’re required to implement innovations at the risk of falling into irrelevancy.

The good news is that there is now plenty of room for entrepreneurs in the banking market. New players will find their place if they can deliver the perfect customer experience by offering customers more freedom and more personalized solutions than ever before.