Financial Technology, also called Fintech, is definitely among the most popular trends in today’s digital world. The reason is simple, it brings along a potential of altering the way we conduct businesses by a great deal. It won’t be an overstatement if we call it a radical movement.
The fintech firms, particularly startups, are taking advantages of technology to offer products and services specifically offered by banks and other fiscal establishments that are more ground-breaking as well as more economical. When you think about it, fintech is a technological advancement that will be more beneficial for the consumer who will be able to get better products and end-user experience at a lower price.
The popularity fintech is predominantly evident through the increasing quantity of liquid money that has been introduced in this segment. More than $25 billion have been invested in fintech in the last five years, which has made it a leading target for venture backing.
According to a report published by Accenture, the famous consultancy firm, there was a growth of 201% in global investments made in fintech companies in the year 2014.
Ever since the economic predicament of 2007-2009, the banking system has suffered a huge loss of trust among the public. People don’t like banks anymore, banks have lost their credibility, and people are not interested in doing business with them.
A report provided by the Millennials Disruption Index shows how this period of two years turned out disastrous for banks where it matters the most, faith of consumers. This study included 10,000 respondents for the survey, and the report was astonishing:
- 53% thought their bank doesn’t offer anything different than any other.
- 71% would prefer to visit a dentist instead of listening to a bank representative.
- 68% say that the way we use our money will be completely different in five years. (They are not wrong about it)
- 70% say that the next five years will change how we make payments for the products and services we use. (Another valid point)
- 73% are expecting Google, Apple, Amazon, PayPal, or Square to enter the realm of financial services.
- 33% believe that bank will no longer be needed five years down the line. (Very unlikely, but they are entitled to their opinion)
The financial crisis of 2007-2009 has also burdened the banking industry with harsher rules and regulations, especially when it comes to lending money. Because of this, many SMEs had their loan applications rejected.
The void thus created has given a rise to many alternative finance platforms. It is a division of services which falls under the huge umbrella of fintech. Fintech is the new digital landscape in the financial world, and it is evolving at a very fast pace. It works outside the regulations of traditional banking, and enables individuals and startup businesses borrow finances from other individuals and enterprises.
Fintech is definitely not going to make traditional banking obsolete, but it will surely seize a mouthful out of each and every element of traditional banking, especially their product portfolios, that too for the benefit of consumers.