Fintech organizations have been on the rise for the previous several decades all over the world. That’s kind of understandable – easy-to-grasp objectives, quick and inexpensive ways of solving problems and easy access all the time, anywhere. The original Financial Service sector has typically been reasonably traditional in many of its practices and mostly taken over by huge incumbent multinational firms established through units of merging. Therefore, following the international financial trouble, the mixture of significant changes in financial rules, customer demand for financial products and services that was left unmet by an impaired and illiquid system, and improvements in technological innovation, have reduced limitations to access and created unmatched opportunities for financial technology (FinTech) organizations to create impressive methods to both supplement and contend with the incumbent players. And this is exactly where Fintech champions came in, offering a number of every day financial solutions from easy mobile payments and processing to trading and capital raising to borrowing and lending (and beyond). Investment strategies into, and successful leaves from, the FinTech sector have been increasing year on year for the past three to four years, indicating that this is a lucrative time to be involved in this space – not only because it’s improving and developing, but also simply because it gives a measurable benefit for the everyday consumer.
But why does it matter?
It matters because we’re all touched by this, to a bigger or lesser extent. And if you don’t agree – think otherwise, since Fintech does not refer to one particular piece of technology; the impact of Fintech is actually felt across a wide range of industries in B2B, B2B and C2C. The disruptive influence of Fintech is tremendous: it’s changing the way that financial services operate, it’s changing customers’ expectations and it also has an enormous impact on the revenues of banks themselves. Let’s analyze Fintech impact on all three to grasp what has already been done and what’s yet to come.
Rapidly changing technology (think smartphones) is giving a green light to Fintech innovation. Internet access 24/7 allows us to connect and get services, usually enhanced by machine learning, everywhere and anytime. Thanks to technological developments, transferring money across borders within a few clicks has become possible and a lot cheaper, lending has become way less time consuming and accessible and trading and capital raising has become even more global and easier. Consumers are enjoying decreased management and product fees as well as streamline and targeted professional advice. Investment professionals are empowered by more effective portfolio management software and the development of new product (e.g. crowdsourced ETFs and managed marketplace loans).
Fintech is obviously changing the way in which consumers see financial services. Customers, given the rapid technological changes, have become more demanding: they expect that anything can be done online through mobile devices and are seeking for personalized products with a simple application that can be performed in a speedy manner, such as a “one-click” loan, an instant money transfer overseas or a speedy investment online. Fintech empowers people to take charge of their finances, and gives access to better choices. As simple as that.
With key talent and investors pouring into the FinTech space, traditional financial institutions have to act quickly. Complex banking institutions all over the world have been working for quite a while to simplify their businesses and lower their reliance on traditional infrastructure. This, however, is a difficult task due to heavy regulation. Banks realize that they are not as fast to change and adapt as Fintechs, and therefore most banks have started looking to fund Fintech startups that create products to be added to bank products to improve user experience, allowing Fintech industry to empower banks to create better services for the end-user.
The future of Fintech is far from gloomy – Fintech has a great potential to change the social economic lives of people across the globe. It is likely that FinTech companies will keep developing and adding additional services; some companies are already providing supply-chain services such as procurement and inventory management. A few people predict that great banking opportunities will evolve in Africa, as experts believe that Africa is expected to be the second fastest growing continent within 10 years, giving huge opportunities for the Fintech space to establish their base in the continent to serve a large portion of unbanked and underbanked African population. Banks are also expected to initiate and engage with Fintech companies in order to benefit from their technology expertise through bank-fintech partnerships, especially since Fintechs (in general) are keen to work with banks recognizing its status, history, safety and stability. Overall, it’s clear that there’s a lot of scope to expand and impact our everyday lives offering cheaper, faster and more innovative products.