How FinTech Is Playing a vital role to Changing Business in BFSI Sectors.
Article by :- Ravi Gupta (Fintech| API & Open Banking|DigitalTransformation Enthusiast)
Financial institutions, financial procedures, and financial services have drastically evolved and improved in the last few decades. With the evolution of technology, the entire industry has undergone a massive transformation that has changed the way the financial procedures are carried out and the way the financial institutions operate. The collaboration between finance and technology has led to a radical change in several aspects of finances like banking, investment, trading, cryptocurrency and more. This evolution has led to the popularity of a term “Fintech,” a short form for the phrase Financial Technology. This article sheds light on what Fintech is and why has it become a rage in the modern world.
What is Fintech?
Fintech is much more than just a reference to financial technology. It is often referred to as the innovative technology that is used to improve the traditional financial methods and develop effective solutions for financial services which are at par with the latest technological trends. Banking Software and mobile banking applications are classic examples of development in financial technology.
Fintech Revolution in India
Like every other country, India has also experienced the marvels of financial technology in the banking and finance sector. For India, which is a cash-driven country, this is a step towards creating a cashless society. With a range of fintech services and fintech API, It has changed the way the people carry out daily transactions and handle their money.
This dynamic transformation brought upon by the association of technology and the financial sector has opened a gateway for the fintech ecosystem in India. In less than five years. Additionally, indigenous firms playing a significant role in the development of this massive industry include Paytm, Phonepe, Mobikwik, Freecharge. Googlepay etc.
Impact of Fintech on Banks and Financial Sector
The rise of Fintech has changed every aspect of financial services and banking.
Loans: It has transformed the way the banks operate and has opened a huge new market for market-based lending. With the entry of Fintech companies, loans and related services can be easily availed by consumers. Alternative models are being created to provide consumers with capital, whether it is a business or an individual. These companies are devoted to improving customer experience, financial products and speedy approval of loans.
Payment Services: Fintech services has impacted how the payments are made. Now, payments are made online using internet or through smartphones, alleviating the need for merchant accounts. Money can be transferred directly to the bank account, which reduces the chances of frauds and transaction fees.
Wealth management: With the rise of fintech, the way people save money, manage assets, and invest their capital is changing. Using the new financial technology, these companies aim to provide customized solutions of managing their own wealth and investments. Fintech software also helps in comparing options in order to create the best investment plans for personal finance.
Remittance Transfers: For years, banks and people have struggled with traditional remittance services that can be expensive and complicated. Over the years, fintech companies have strived to make these inbound and outbound transactions simple and affordable.
Insurance Services: Acquiring insurance has now become a less complex procedure. With customized plans, all can be done on the internet. From the application process to the payment of premiums periodically, this paper-extensive service has evolved with fintech innovations massively.
Financial Technology Trends
1. Blockchain Technology:
This is one of the greatest revolutions of financial technology that has taken the world by storm. It is forecasted to change the traditional banking systems. In simple words, it is the constantly updating digital-ledger system wherein technology is used to create blocks and record transactions permanently, without the ability to alter the information. Banks are exploring the potential of this technology and changing the way the money is transferred, transactions are verified and recorded. It is expected to revolutionize the KYC systems, clearance and settlement systems, loans and credit applications, bookkeeping and auditing.
2. Digitized Banks:
Digitization of Banks has replaced the brick-and-mortar branches. It has led to the rise of the use of internet or mobile applications to carry out financial transactions. With the rising trend, the need to visit your bank for various purposes has diminished. With the alliance of fintech and banking sector, the bank visits are expected to drop further as people will continue to use mobile and internet for banking procedures.
3. Mobile Banking:
As mentioned, Financial technology has given rise to the new trend of mobile banking. Various apps developed using new financial technology for smartphones allows us to perform various banking transactions even on the go. The convenience and transparency it offers is commendable. Fintech companies are committed to making this experience even more user-friendly and simple.
4. Artificial Intelligence:
The collaboration of Artificial Intelligence with Fintech is expected to be quite a revolutionary one. Using a voice-operated assistant or next-generation chat-bot is forecasted to change the customer experience. Use of AI will alleviate the chances of human error and create accurate answers. It can also help recognize fraudulent behavior easily.
5. Biometrics:
As the technology advances, so does the chances of cyber-attacks, hacks, and frauds. However, to reverse these side-effects of the technology, Fintech companies are exploring biometric technology. Biometric authentication is a powerful tool to ensure top-class security of customers’ account and capital.
Challenges of Financial Technology
Fintech in various industries, especially banking and finance, primarily face three major challenges that must be tackled at the earliest.
Cyber Security is one of the major concerns of Fintech industry. Many critics are skeptical about the security of the confidential data. The digitization of the banking and finance sector makes it susceptible to cyberattacks. Hence, the government and business firms must collaborate to makes their systems robust enough to ward off any kind of exposure of sensitive data.
Acceptance: Customers must be able to accept and trust the changing systems. Fintech services are expected to override the traditional way of banking and financial services, which remains a major challenge for consumers with conservative mindsets.
Lack of Human Touch: Chatbots and AI are expected to replace human contact. This could prove to be a major hindrance in the growth of various sectors, applying fintech technology to serve their customers. Therefore, the companies must work to retain human touch as they try to meet customer needs and satisfaction.
Future of Fintech in India
In very little time, India has become one of the leading nations in Fintech innovation. The financial technology is reforming the lives of Indian citizens and is a step forward to the creation of digital economy. In the era of “Digital India,” the Fintech companies are bound to find several opportunities to capitalize. The Government of India has recently taken an initiative called the ‘Jan Dhan Yojana’ scheme aims to open a bank account for every citizen. In addition to that, in an attempt to popularize cashless transactions, the government has offered tax rebates to traders that accept more than 50% of payment in through electronic payment system. The digitization of banks will make fintech technology the future of banking & financial sectors of India.
