Reason Fintech innovations might soon end banks domination
Financial technology (Fintech) innovations are the leading viable financial start-ups in the world right now. The emergence of fintech in the past few years has been a threat to the dominance of conventional financial systems and outlets like the banks.
This is, however, surprising, as the banking industry has never lacked technological advancements. Credit cards have been introduced as far back as the 1950s. Internet banking has also been in use for more than two decades.
What then makes the recent fintech unique and worth the hassle?
- Fintech innovations offer excellent service delivery than conventional banks. Most fintech start-ups specialize in a type of financial service. They do not provide all the services conventional banks offer. This enables them to provide better services in this regard. In the delivery of their services, they engage in a client-centered approach. This endears customer satisfaction and market success. Fintech start-ups offer lower transaction costs, higher interest and earnings, little or no account management fees, and so on.
Established bank institutions do little or nothing in pursuit of customer loyalty. Coupled with the better services fintech innovations offer, these banks are left with grumbling customers and low customer turn-over. The most common occurrence is customers diversifying their funds into one or two fintech businesses that can help them with services they consider optimally needed.
Another customer-related challenge traditional banks face is the dwindling trust people have in the system. Many stories of past financial recessions are being recounted year after year. The role of the banking system and the consequent helplessness are vivid in the heart of those who experienced it. There is, however, a fast-growing trust in fintech innovations. They are not susceptible to all the external influences of a financial system.
Also, early technological advancements exposed many shady dealings of banks regarding customer funds. This contributed to the many distrust people harbor about them. Fintech start-ups could’ve done worse if they ever had an era of little or no scrutiny, but nobody knows that for sure.
- Fintech start-up platforms have a better digital experience when compared to traditional banking digitalization. This can be attributed to the processes these systems were built on. Traditional banking systems are still very much in touch with their generational legacies, which are difficult to integrate into the most modern technology fully. Fintech innovations, on the other hand, devote all their resources to updated technological tools and operations.
It is important to note that despite the growing customer strength of fintech innovations, there is no proportional rise in operational costs. They require far fewer physical outlets to operate. This translates into lesser staff costs, property taxes, and general operational costs. The costs required to maintain high internet traffic and security are lower than the numerous fixed assets banks acquire to deliver their services.
The harsh regulatory policies of most nations regarding banking institutions have not been extended to fintech start-ups too. Most governments still regard them as private business entities, and not commercial banks, where the government has some roles in protecting the funds of her citizens.
The emergence of financial technology has indeed been a blessing. Many improvements can be seen in the different aspects of banking. An example is the introduction of chatbots, which has dramatically improved customer care services. Advancements in internet technology have greatly helped fintech operations. The introduction of 4G and 5G technologies has made many fintech operations seamless.
Examples of top fintech companies include Stripe, Chime, Adyen, SoFi, Lufax, Coinbase, PayTm, and so on. They offer services such as excellent payment services, investments in mutual funds and stock trading, cryptocurrency exchanges, lending marketplaces, financial cybersecurity, etc.
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