The banking sector has seen its fair share of controversies and scandals. This has led to the public losing confidence in the traditional banking system. As if right on time, the Financial technology (Fintech) entered the market and is gaining a strong foothold in the industry. So much so that, there have been claims of it being one of the biggest disruptors for the traditional banks in the recent past.
“Adoption of FinTech providers for money transfer and payment services rose from 18% in 2015 to 50% in 2017.”
– EY Global banking outlook 2018
Even though the traditional banks tried to adopt certain technologies over the years such as mobile banking, e-statements among others, the consumer expectations are changing. The FinTechs has proved to be a boom for both, the banked and unbanked. It’s time to acknowledge these disrupters and look at the ways in which the FinTechs have managed to change the banking experience game.
Financial Services for Small Businesses
Due to the global financial crisis of 2007, the banks have become apprehensive in lending to the volatile, small businesses. Here, the FinTech companies come into the picture and have managed to close that gap by providing the small and mid-sized businesses with an alternative. The FinTechs lend at a comparatively lesser rate and offer more transparency. Even though the traditional banks have an upper hand when it comes to the regulation and compliance, but FinTech companies have managed to take advantage of this reluctance of the traditional banks to build a base of loyal customers in the form of SMEs.
Banking for Unbanked
There is a major portion of the population which still does not have access to or knowledge of operating the banking services. Digital wallets have thus been a blessing for them. The unbanked or the underbanked rely mainly on the cash-driven economy. Though it is okay to be dependent on cash to make your transactions, but it is better to have the means to convert that cash into digital currency. This not only helps in financial transactions but also provide an added level of security to the monetary assets.
Chatbot for Interactive Service
According to PWC research, AI-focused FinTech start-ups have attracted overall higher investments with an average of US$1 billion in investments over the last two years.The most common use of artificial intelligence in the financial sector has been in the form of virtual financial assistance i.e. the Chatbot. They have been most popular for personal finance apps such as Cleo – an AI-enabled application to manage and track expenses or Plum, a saving-focused finance chatbot.
Increasing Customer Expectations
Pleasing the bank customers has become quite difficult with their growing expectations. Both businesses and private customers now expect better access, convenience and greater flexibility in addition to improved transparency. The FinTech companies have managed to identify and take advantage of this gap and are using the digital channels to provide a much easier access to the customers by opening up the traditionally closed markets.
Remote Customer Onboarding
Customer want convenience. They don’t appreciate having to go through a lengthy and tiresome process to open a bank account or procure a loan. Virtual or remote customer onboarding can solve this issue. This can be achieved using a Video KYC solution wherein the KYC official verifies the documents, does a liveliness check and approves or rejects the KYC application on a video call. Thus, saving time and ensuring wider customer reach and KYC completitions.
Money Transfer with Mobile Devices
Gone are the days when we needed to carry hard cash to make payments. Technologies like Apple Pay, Android Pay, Samsung Pay, (etc.) let the customers link their credit cards and bank accounts to their mobile phones and other smart devices such as a smart watch. A considerable shift has been observed in the way customers’ behavior is changing when it comes to banking experience. It is expected that by 2022, the mobile payments market is estimated to grow up to $3.4 trillion. If these estimates are anything to go by, the traditional banks will have to catch-up soon or they will be left behind.
Budgeting and Finance Management
Conventionally, people used to reach out to their relationship or wealth managers when they wanted to manage their finances or take investment decisions. But, that does not hold true anymore. Mint.com, for instance, is a web-based personal financial management service which helps the customers to keep track of their expenses and savings accordingly. Today, we have a lot of financial tools and services at our disposal, but it can get difficult to manage all of them. Thus, the FinTech are stepping in, to make things easier for the customers.
The Emergence of Digital Currency
FinTech companies are jumping at the opportunity to use the blockchain enabled digital currency to drive a cashless economy. Digital currency such as bitcoins saw many takers recently when blockchain became the new big thing. This cryptocurrency uses advanced encryption to regulate the units of value and transfer funds without the need of a central bank. Though the digital currency has seen a dip recently, there are good reasons to expect the bitcoin to bounce back. In future, if and when these currencies become regulated, it will further penetrate into the minds and hearts of the mainstream banking customers.
The FinTech companies have emerged as the disruptors for the retail banking, but, they still have some ground to cover. One of the biggest challenges that they have to look into is the kind of presence the traditional banks have on the global financial markets. Moreover, the government rules and regulations also favor the mainstream bank. Having said that, the situation is not so bleak for the FinTech yet. Having realized their weaknesses, the FinTech are steadily working making their presence felt by educating the businesses about their true potential.
The bottom line is, that the traditional banks and the FinTech need to follow a collaborative approach rather than being threatened by each other. This will not just be beneficial for them, but, for the whole financial services ecosystem.
Ameyo has launched Video KYC solution to help Banks, NBFCs, and Mobile Wallets to onboard customers faster and reduce the customer onboarding drop-offs by 20%. Ameyo Video KYC is completely complaint with the recently launched RBI guidelines and ISO 27001 certified with enterprise-grade security.
Check my series to understand Why Do We Need A Strong Call Center Software In FinTech Industry