Is Fin Tech the future of banking?
Banking and financial services industry is undergoing a massive transformation all over the world and that change has come quickly. Before 2010, FinTech wasn’t even on the radar of banking institutions .
Now, suddenly it seems, there is an upsurge in activity in the FinTech community.
Global FinTech financing has grown from less than $930 million for the whole of 2008 to over $1.04 billion in the month of October 2014 alone.
Customer experience is driving and bringing forth disruptive technologies and innovation in the form of services like mobile walletsand branchless banking, and FinTech startups are offering a plethora of banking solutions – from payments, money transfer to apps and peer-to-peer lending.
Follow the Fin tech sector closely and you see bursts of activities in different parts of the world and different sections of the communities coming together to give it its due importance.
We can see growing signs of action in Australia with a strong FinTech startup ecosystem taking shape seeking to disrupt the traditional banking industry. Similarly, London is becoming quite a hub of all things disruptive in the financial services industry globally with branchless banking and an ever increasing focus on providing banking services to the unbanked.
KPMG in collaboration with AWI and the Financial Services Council has released a report detailing 50 of the world’s strongest FinTech innovators.
Though traditional banks are now making conscious efforts to revamp their outdated systems and introduce new offerings to lure Millennials, they are, however, still competing with other global banks and financial institutions.
According to a recent post by Scott Walcheck, “Financial services are becoming à la carte. People, particularly millennials, are moving away from single monolithic banking institutions serving the majority of their financial needs to hand picking the specialized services that work for them.” Banks and financial institutions are yet to cover ground to compete with the likes of new entrants in the financial services arena.
It is already evident that FinTech is disrupting the traditional banking models. Another interesting development on the sidelines of FinTech in the financial industry is the entry of new players in the banking industry.
Tech giants Apple, Facebook and Google are piling onto the financial bandwagon and showing keen interest to provide financial services to their customer base. These players are using their platforms and scale of their existing user base to provide gamut of services – fee free payments, peer-to-peer payments etc.
The times suit them
We are living in a time where Gen Y or ‘Millennials’ have virtually grown up connected and accustomed to open and social lives. The future potential customers of financial services will be driven by these expectations.
Tech giants such as Facebook and Apple would enjoy an upper hand compared to FinTech or traditional banking institutions in gaining the trust of these customers as they have spent time and money building brand equity and understanding their customers’ psychology.
According to a recent study by Gemalto, “One in four millennials has effectively abandoned branches altogether.”
There is an interesting report by the UK Government Office for Science on FinTech Futures: The UK as a world leader in Financial Technologies which outlines measures such as setting up of a “FinTech Advisory Group” with representation from the government, regulators, trade associations amongst others for developing UK as a global hub for FinTech innovation community.”
While the debate over the relative impact of FinTech vs Tech on the financial world is generating heat at the moment, it is measures such as the ones being adopted by the UK government that will lead the way forward.
Definitive measures on a global scale will act as critical success factors for the FinTech-Tech players to flourish and launch innovative financial offerings to compete with the mainstream banks and financial institutions. We need equal amounts of innovation and disruption with government support, monitoring and intervention to regulate the industry globally.
These are certainly exciting times for FinTech startups and Tech giants around the world as they are capture the limelight. And it’s foreboding time for traditional bankingand financial institutions as the future of the industry recalibrates around the changes wrought by technology.
About the author
Ina Bansal works in brand reputation management and corporate communications for Nucleus Software. The views expressed here are her own.