How Fintech is Changing the Industry
If you have recently played a game of monopoly, it wouldn’t be all that surprising if you have a vivid and recent association of a friendly-looking, well-rounded, moustache wearing individual wearing a top hat would be associated with wealthy individuals and financial institutions in general. People commonly associate pinstripe suits and towering skyscrapers made of glass and steel with the financial world at large.
It’s likely a traditional view we have all been imprinted from a young age to believe. These financial institutions have been here since forever, and it’s where you would bring your money to.
Behind the doors and walls of the bank, these people (predominantly men) would do all sorts of complicated things with money and perhaps even give you a return in the form of interest. It’s something straight out of Mary Poppins.
However, the financial world is changing. These archetypical notions, things that were deemed to be unshakable and unchangeable just a few years back, are going through turbulent times. It’s like a shroud of mystery is being removed and the age-old adage of “that’s the way things work” is being challenged more and more. It’s the age of fintech, the movement that has been changing the rules when it comes to banking, from the corporate side all the way to the regular consumer.
Fintech is being powered by, as the name suggests, innovations in tech. It makes use of the realisation that people carry around a mobile device with the power to connect to the internet and with enough processing power to handle complex software or apps.
It also makes use of the ability to connect large databases in the cloud, transform or enhance this (for example, via AI) and do so in a safe manner via strong encryption. And by doing so, it’s breaking all traditional preconceptions about banking.
Fintech is Beating Banks
It’s no longer necessary to have a significant physical footprint such as large headquarters and branch locations. Through advancements in mobile phone technology and NFC, you no longer need physical bank cards either. Automation and working with AI also means reducing staffing (and therefore operational cost).
Fintech companies are beating large institutional financial organisations on cost and are exceedingly better at servicing consumers how they want to be serviced (and not exclusively on the bank’s terms). This is why opening a bank account via a fintech company has exploded, and when people send money to Vietnam, for example, they will do well opting for a fintech company.
Is This the End?
One might ask if this is the end of traditional banks? The answer to this question is really up to these banks. In most cases, the traditional banks will have started some project or subsidiary to act as a fintech company. It’s really: “adapt or die”, and the banks have taken notice. The last few years, most banks have been in the news having to cut the workforce.
As the old banks are adapting to the new reality, this will still be something that will happen in the future. In the end, this should benefit the consumer and should serve as a stark warning to any other industry who still only plays by their own rules.
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