A paradigm shift is happening within the global banking systems. The traditional behemoth banks across the globe are being challenged by small, upcoming, technology-backed FinTech start-ups. The growing popularity of FinTech firms such as Ayden, Sage, Monso Bank, Sterling Bank, Paytm, emphasises the inability of the traditional banks to compete with them.
The question here is not about competition between the traditional banks and FinTech on the basis of customer base. The competition and difference are how both approach business. New entrants see opportunity in disaggregating the components of traditional banking and offering targeted solutions with better servicing to both retail consumers and businesses, explains a PwC report.
Emerging technologies such as cognitive apps and DARQ: Distributed Ledger Technology (DLT), Artificial Intelligence, Extended Reality (XR) and Quantum Computing have engendered a lot of frenzy in the recent past in bringing revolutionary change. These technologies have paved the way for smooth customer interaction across consumer touch points.
Globally firms are reckoning the capabilities of these disruptive emerging technologies and have started to explore how these technologies along with data science techniques can improve the customer experience, reduce operational overheads, optimize compliance efforts and help them plunge into new markets to gain enormous revenue at breakneck speed.
Reckoning all the disruptions that are moulding the industry, it is perhaps the right time to discuss the alliance between FinTechs and the traditional financial institutions. At present, some of the biggest breakthroughs in Financial Services & Banking Industry are powered by FinTech.
Why the FinTech-Bank collaboration works is because banks provide a ready-made infrastructure backed by industry expertise whereas FinTech firms bring new innovative tech ideations. Globally India, United Kingdom, USA & China markets have seen enormous growth in payment solutions in the last three years which took digital wallets to the masses and reimagined the Financial Services, Lending & Mortgage Processes as well as the core banking operations.
Traditional players are still in the early stages of customer-oriented solutions, at least when compared to what FinTechs offer. Only 53% of the participants from the Finance sector believe they are consumer-centric, compared with over 80% for FinTech survey participants. (Source: PwC global FinTech survey)
By 2020, social media will be the primary medium to connect, engage, analyze and predict customers, as well as compare banks’ offerings. Traditional providers are actively participating in the mobile oriented approach to reach out to consumers, e.g. designing their products and services with the aim of enhancing customer engagement via mobile like bot assistants.
The incorporation of Application Program Interfaces (APIs) enables technology solution providers such as e-Zest to act as an intermediary layer between Financial Banking Institutions and FinTechs to deliver robust, secure, compliance-oriented, regulated and value-added solutions and features that can easily be integrated with the core platforms.
The Finance & Banking industry is experiencing disruption at an increasing pace. As rightly stated in a recent Forbes publication, over the past couple of years, traditional financial institutions and non-traditional FinTech firms have begun to understand that collaboration may be the best path for long-term growth.
Over the next two years, channel diversification will be a key driver in the financial sector. Firms are aspiring to use the Blockchain enabled digital currency to drive a cashless economy. Digital currency such as bitcoins saw many takers recently when Blockchain became the new big thing. This cryptocurrency uses advanced encryption to regulate the units of value and transfer funds without the need of a traditional bank. Though the digital currency has seen a dip recently, there are good reasons to expect the bitcoin to bounce back.
Technologies such as bitcoin, Blockchain, Machine Learning & Artificial Intelligence would indeed facilitate the implementation of a dynamic, user-friendly, customer-focused regulated financial industry.