At its best, Finance Technology is a holistic and broad discipline that studies and analyzes the worldwide financial system. The term ‘FinTech’ is often used to describe any innovation of the financial sector that impacts the financial market. This is why FinTech startups are having a major impact on accessing banking and other financial services online. Here are the top reasons why financial institutions should invest in FinTech.
1. Better Customer Service
One of the biggest problems for customers of traditional banking companies is the difficulty of getting assistance when they need it. If you have a problem or question about your bank account, you can call customer service at any hour of the day or night. But if you need help accessing your money using mobile devices, you might not be able to get through. There may be long waiting times for customer services representatives to respond even if you can. These factors alone make FinTech appealing to people who want fast and efficient customer service. For example, Google Wallet offers 24/7 customer support via live chat and text messages. Mobile apps offer great convenience for customers by allowing them to deposit funds right from their phones. And these days, even traditional financial companies such as Bank of America offer 24/7 customer service via phone calls and text messaging thanks to innovations like Branchless Banking. Another popular way to streamline customer service is by creating dedicated customer care lines for different departments, rather than having customer service representatives handle multiple requests at once.
2. Increased Accessibility and lower costs
The benefits of FinTech extend beyond customer satisfaction. One of the most important things FinTech has brought us is increased accessibility. Thanks to the growth of mobile apps and online payment options, today, anyone, anywhere, can complete a transaction. Everyone can benefit from FinTech and reap the rewards, from personal finance managers to small businesses. This includes those traditionally shut out of the mainstream financial system due to age, disability, financial literacy, or social status. This has been made possible by advances in technology, including smartphones, tablets, wearable computing, and cloud-based technologies. Another big reason to adopt FinTech is because of cost savings. Traditional banking has some advantages over digital alternatives, but many digital banks boast lower fees and more transparency. Some FinTech firms cut costs by automating processes such as loan processing and bill paying; some use mobile payments instead of paper checks for transactions; others focus on eliminating redundancy in the industry with new business models designed to replace outdated systems and eliminate unnecessary intermediaries. With every company looking for ways to save on expenses, FinTech is likely to become more accessible and affordable as time goes on.
3. New Platforms and Customer-Driven Decisions
If you think FinTech is limited to mobile apps and mobile payments, then you would be wrong. With the rise of blockchain technology, digital currency, and smart contracts, financial institutions are starting to develop platforms tailored specifically for the needs of FinTech startups and established players alike. One of the largest FinTech firms in the world is JPMorgan Chase and their platform JPM Coin which was launched in 2018. This will allow startups to raise capital quickly with minimal red tape and create new models for peer-to-peer trading across national borders.
FinTech has started influencing how customers interact with banks in many ways. When choosing to open an account, consumers first decide whether or not they prefer traditional brick-and-mortar outlets or digital channels. Many banks have responded by opening smaller branches around urban areas and investing heavily in eCommerce sites like BofA.com and Ally.com. Others partner with tech giants like Amazon to provide better mobile apps and other forms of user experience. Still, others look solely to the internet to reach their target market.
4. More Collaboration & Innovation and enhanced security
There isn’t one sector that hasn’t seen some form of collaboration between industry leaders. For example, eBay acquired PayPal, Apple partnered with IBM to bring its iTunes store to China, and Mastercard formed strategic partnerships with RBC Wealth Management. These companies created unique products that allowed them to partner with existing brands rather than trying to compete with them head-on. These collaborations mean there are often many different ways to solve problems, and there are plenty of new ideas being developed that haven’t even been thought of yet.
While the benefits of FinTech are numerous, security is always foremost in mind. With so much technology involved, it’s impossible to eliminate all risks. However, every year we see more and more systems being put in place to protect against fraud. Whether it’s biometrics (using fingerprints), 2D/3D face recognition, or iris scans, solutions exist that make it increasingly difficult for criminals to steal money from individuals or businesses. And if something does go wrong, large insurance companies are on hand to help cover any losses. This has provided peace of mind for both people and organizations when using digital banking while allowing access to information that wasn’t previously available.
5. Risk mitigation/Reduced cost of compliance
There is no question about it when it comes to complying with regulations and laws; FinTech has made this process easier for both consumers and business owners. Whether it involves anti-money laundering regulations or identity theft prevention, FinTech continues to streamline the way services are provided while reducing costs associated with proper legal compliance. Even though most startup failures occur when a company tries to do too much too soon, FinTech lets startups focus on innovation without worrying about dealing with regulatory burdens. It’s easy to lose sight of the bigger picture; your success depends on getting things right, but it’s far less painful to get it wrong and fail fast.
As mentioned before, the use of technology is growing exponentially. No longer constrained by physical location, people can now access financial accounts and services regardless of location. Startups use this trend to their advantage, offering mobile solutions for everything from sending money abroad to managing investments. Some financial institutions, such as Santander US, have gone the extra mile by creating native iPhone applications for customer convenience.
6. Transparency and Scalability
The word “transparency” may be synonymous with big corporations; however, when applied to FinTech startups, it means accessibility. Transparency also extends to information sharing, which is essential for growth. Because of the nature of startups, all employees must work together to ensure projects move forward quickly and efficiently. In addition, startups must rely on outside vendors to execute projects, and transparency extends beyond what happens within the company. Vendors should be willing to share results and the company as a whole. This allows everyone to build upon previous successes and create a culture of trust and integrity, both critical ingredients for long-term success.
One of the biggest challenges facing any industry today is scalability. The rise of social media and online marketing has created a massive demand for services that allow companies to manage their digital presence effectively. It doesn’t matter if you run an e-commerce store or sell services worldwide – you need a scalable solution that will help you maintain a consistent level of service across platforms. With FinTech, you won’t have to worry about scaling up or down because the technology behind most FinTech startups works independently of existing systems. There might be some integration required at times, but the technology is designed to handle multiple requests seamlessly.
7. Ease of Integration
Many FinTech startups focus on the consumer side of things (e.g., mobile payment apps). These startups require seamless integration with existing infrastructure to compete with traditional financial institutions. To do this, startups must learn from the experiences of those who already operate in certain environments before designing a product that fits perfectly. Startups typically hire experienced programmers who understand specific processes and procedures. They also work closely with IT teams to develop the right tools to link back into legacy systems. Sometimes the process requires extra effort, but the result is a system that provides a solid foundation for future expansions.
The FinTech boom may seem unstoppable, as it shows little sign of slowing down. Investors are pouring money into startups that offer innovative ideas and new ways to connect users. Whether you’re currently working within the finance world or are interested in starting a new career path, there is certainly something out there that could suit your needs. Even though FinTech startups face stiff competition, they continue to grow quickly and become more indispensable every day. This means that these entrepreneurs could soon reach critical mass sooner rather than later and become household names.