What is FinTech? How is FinTech disrupting Financial Services?
A combination of the words Finance and technology: FinTech. Financial processes can get complex sometimes and FinTech companies aim to make these processes easy and efficient.
As the financial procedures such as investments, payments, loans, etc. have simplified over the years, it all only requires a person to have a good internet connection and an electronic device (Laptop, phone) that supports online transactions. The new generation is a generation that runs low on patience. Everything needs to happen within seconds. The idea for financial services also remains the same. The introduction of new financial technologies that occur as a result of prudent financial management while employing digital technology has become a crucial component in the growth of financial markets. Considering this, banks had no other choice but to launch new digital interfaces through which all financial services can be accessed. The introduction of new technologies and ideas has had a huge impact on the financial sector, on the financial services market. Development in the area includes the introduction of e-wallets, online funding, digital banking, P2P platforms, online insurance, etc. The growth and success that Fintech companies are achieving come as no surprise. Their objectives are easy-to-grasp, easy accessibility during all times also plays an important role, using their services does not burn your pocket, and the work gets done. Fintech companies are leading in financial services delivery, transaction medium, and business analysis methodology.
Which parts of the Financial sector are being disrupted by FinTech?
This unique amalgamation of Financial services and technology has been through all kinds of changes over time. Traditional financial systems are being transformed by Fintech companies now. This is essential because the majority of the audience is choosing to go with the easier, more convenient way to go about their financial transactions. Some of the ways that FinTech has an impact on the Financial System includes:
1. Transactions:
You do not need to wait in a long queue outside the bank if you want money. Almost all the shops have started to accept online payments as the digital world continues to grow. It also makes for a more economical and safer option as online transactions require you to have no cash in hand. You can pay money online through any device, by just logging in with your credentials. Most of the banks even have applications that help you with the transaction process. P2P money exchange (transfers that take place between individuals), B2B payments (transfers that take place between legal entities), mass payment services, cloud cash desks, smart terminals, are just some of the many services that Fintech companies offer for their customers. Financial services applications also help you keep track of where you spent your money, and maintain a budget. Some of the examples of online payment apps include Paytm, Google pay, PhonePe, ICICI Pockets, etc.
2. Lending:
Fintech innovations are here to stay. Innovations in the field have negated multiple visits to the lenders’ office. Fintech has made it possible to apply for a loan online. Fintech has not only brought the lending sector online, but it has also simplified and accelerated the process. PaySense, LoanTap, KreditBee are some of the most popular brands that lend money online when there is a requirement. Some lenders provide immediate loans with minimal paperwork.
3. Investment:
Mutual funds, FDs, Stock Market, you must have heard about these terms. Consumers benefit from lower management and product expenses, as well as more focused professional assistance. As the documentation process has become much easier through Fintech companies, you can now effortlessly invest online by just completing a few steps. The KYC documentation has become direct and easy with the establishment of the Central KYC registry. You must have heard about brands like Groww, myCAMS, PayTM money, and KTrack mobile app among many others that can help serve your purpose of investing in Mutual funds, FDs, and stock markets.
4. Customer service chatbots:
Another feature that is worth mentioning about FinTech companies is how they have introduced Customer service chatbots that use machine learning and natural language processing which helps them interact with customers online. This makes the entire process smoother as these bots are there to help the customers every step of the way. Some companies have taken it to a higher level and introduced other functions as well. One such feature is giving investment advice to customers which can be seen in Bank of America’s chatbot, Erica.
Impact of Machine learning and Artificial Intelligence in FinTech:
Development of new and innovative designs that alter the financial processes by being efficient, helping in decision making, provide insights that can help simplify user experience has made the functioning much easier for users. AI and Machine learning have changed the world of financial services for good. Fraud protection is much needed in today’s world. Online scams, theft, and hacking have got everyone scared but with the help of AI and Machine learning, everything is in control. They protect both parties, i.e., the users and organizations. Protection of users’ accounts, or cyber security is guaranteed as the algorithms can identify suspicious activities and inform users. Insurance policies are being reshaped using artificial intelligence. FinTech apps are being used to measure the level of risk in this market, which is heavily influenced by financial tools. Organizations can use technology to calculate a person's risk level based on their activity. Chatbots are also a product of AI and Machine learning and have made everything much simpler for users to understand. With the help of AI and Machine learning, FinTech companies have come a long way with great progress.
What is the effect of FinTech on banks?
The banking sector does realize that they would now need to simplify their traditional banking methods, transactional processes, and in general all the financial steps that used to take up so many days. The only thing is that it is not a day’s work, it would take a good amount of time to get the complete change we are looking for. The banking sector has realized this as well and thus started to fund the FinTech companies. Funding FinTech startups will allow them to create products that can help better the services provided to users and make the process much easier. Products created by these startups can then be added to bank products which will only improve the user experience and help the general public.
Conclusion:
As the technological world is growing, it is important to keep up. FinTech companies provide an easier and efficient way by offering several financial services. These companies also help save a lot of time and effort as everything can be done from the luxury of your home.
