In today’s day and age, there are changes and technological advancement that is paving their way to make almost everything in our life available online. With the introduction of financial technology (FinTech), alternative solutions, and a variety of business models have continuously been emerging, which could potentially render traditional banking practices obsolete.
FinTech radically alters the way certain financial services are performed in such a way that it allows current financial services and products to be delivered in arguably innovative ways. Numerous fintech startups have now appeared, which provides services that are even more specialized and are often cheaper, faster, and more convenient than those offered by traditional banks.
It is now a trend that has captured not only these startup enterprises but also the banks themselves, which compelled them to adapt to this new revolution in the banking industry for them to thrive.
This article, therefore, discusses the beauty and advantages that come with FinTech, particularly concerning the retail banking industry.
FinTech has significantly increased financial access. It has allowed everyday people to access services previously reserved for wealthy individuals, or those individuals with particular economic stature. To illustrate, take, for example, the field of investment.
It has now become more accessible and cheaper to give investment advice to the public. This means that what was ordinarily geared towards a particular set of people only is now open to everyone. Another example would be in terms of lending.
Before, lenders only had limited data sources to use when assessing risk. This means a lot of people are denied or otherwise charged with higher interest rates for a loan. Now, Fintech uses multiple sources of information when underwriting consumers. Consequently, it gave way to more opportunities for the public.
With Fintech, it has become more accessible even for those people with minimum credit scores to obtain approval to get an installment loan online.
According to the World Bank, 31% of the adult population globally is unbanked. This refers to individuals who have no access to a bank account or those who have no access to credit institutions.
These people are those who stash money under their mattress to save.
Some of the reasons cited by these individuals were due to the non-accessibility of the financial institutions, opening an account being too expensive, and lack of necessary documentation.
However, for the very first time in modern history, with the advent of FinTech, it enabled multiple individuals of a variety of economic stature to gain access to some of the essential financial services.
Delivery of cheaper, more efficient and convenient financial services
One of the advantages brought about by FinTech development is the provision of services that surpassed some of the restrictions of the payment systems observed by traditional banking institutions in settling financial transactions.
An excellent example of such restriction is in terms of geographical barrier wherein people still has to go to the banks to carry out payment transactions.
The advancement of FinTech somehow prevailed over such restriction when people started availing FinTech services such as digital and mobile wallets, mobile points of sale, and peer to peer transfers.
The advantage of using these services is that it is readily accessible from mobile phone applications that carry out some digitized versions of credit or debit cards.
Moreover, it is convenient to use because the centralization of payment options lead to shorter purchase processing time. It provides digital or mobile wallet services wherein users can quickly transfer money between any two wallets within the platform. What usually happens is that the client deposits cash in his bank account that is associated with a digital or mobile wallet. With sufficient funding, the client, after that, is allowed to transfer money to another user.
Such transfer by FinTech companies is less costly, faster, and more convenient compared to traditional providers. It is cheaper in the sense that it only incurs lower operating costs and charges lower fees. It is faster compared to bank to bank money transfers wherein clients are served in their physical branches and subjected to several security checks before making money transfer.
Just like any other growing industry, FinTech does not come without risks. It has its fair share of advantages and disadvantages. Although advantageous and convenient as it may seem, there are still things we need to look out for.
Be that as it may, since the technology is slowly integrated into traditional banking institutions, rules and regulations have been implemented by various government agencies to assure that certain risks are being controlled.
As the banking industry continues to grow, it has also learned to adapt to its shortcomings and new challenges through the use of the right tools, proper management, and adequate regulatory policies in place.