The introduction of Fintech or financial technology was back in the 1950s when credit cards came into existence. Next, internet banking came into the picture in the 1990s. But in recent years, Fintech started taking over the traditional banking scenario.
The fintech mindset is drastically expanding after the tech-savvy generation, aka millennials. Undoubtedly, this is one of the hot topics of discussion, as confirmed by Google trends.
Before we move further, let’s take a look at some of the major statistics:
The global fintech market is expected to reach $309.98 billion at a CAGR Of 24.8% by 2021
Fintech drastically grew from covering 5% of the personal loan market in 2013 to covering 38% of the market.
Statista suggests that Fintech revenues are expected to grow at a rate of 12% (since 2018) and are expected to reach 188 billion euros in 2024
Let’s now look at some of the top reasons Fintech will take over the banking industry.
Increased Security Relieves The Stress Among Users
The Wirecard scandal is one of the biggest scandals in the Fintech industry.
Set up in 1999, this electronic payment transaction service was once valued at 28 billion dollars. It collapsed on June 25, 2020, and declared bankruptcy. At that time, it owed around $4 billion to creditors.
A series of investigations revealed that the company faked its sales transaction to inflate profits and revenue. After fighting in the courts for a long time, they finally agreed to the havoc they created.
This scandal gave birth to a massive public outrage demanding more safety and security. The need for security in this industry drastically increased after COVID-19 as it handles highly sensitive data.
Cybercriminals became highly active in trying to steal vital business data. Embedded integration of data security features became the major concern among fintech companies.
However, in 2021, companies have adopted many Fintech security trends.
Here are a few of them:
Adoption of AI for fraud detection: A large number of data is easily analysed for risk, thereby securing this highly targeted sector.
Increased reliability on advanced blockchain systems: Blockchain technology is a nightmare for hackers as it has highly advanced features like storing critical data as cryptographic hashes.
New regulatory technologies: Regetch ensures consumer security on a greater level by monitoring whether or not fintech companies are adhering to the compliances.
Introduction of Secure Access Service Edge (SASE) Solutions: Linking security solutions ensures a lower level of risk.
Smarter security solutions: The introduction of smarter solutions like AI, IoT, etc., ensures better safety and security of data.
No or Reduced Investment In Infrastructure
Did you know that Neobanks have no physical existence, and they entirely function on technological infrastructure? They are becoming increasingly popular and have succeeded in onboarding millions of users.
Entirely digital functioning is convenient for people. Before opening an account, they don’t have to visit a physical location and get caught up in multiple procedures. Even the thought of opening an account leads to stress due to the time it takes.
Some examples of renowned neo-banks are Monzo, Revolut, Starling, Monese, etc.
A lack of physical location leads to a heavy cut in the customer fee. Apart from that, they give a better and more personalized experience to the users.
Fintech companies prioritize the customer experience. People no longer have to spend their time visiting banks to tackle significant tasks. Earlier, they waited for days for transactions to process, but now everything occurs within 24 hours. Modern technology promotes flexibility and customization, thereby becoming easier to adapt.
Suitable Usage Of Acquired Data
The data collected and analysed by AI and ML help Fintech in giving improved offerings. The targeted offering provides a better customer experience as they are already aware of what people need.
The acquired data is used for segmentation (on the basis of demographics, family, employment, financial standing, etc.), understanding users’ needs, quickly detecting fraudulent activities, etc.
Reduced Customer Fee
Cheap pricing is another reason for considering Fintech a better service provider. As stated earlier, no requirement for a physical location leads to a drastic cut in the charged customer fee.
Ease In Making International Transactions
The debit card offered by your bank cannot make international transactions unless you get it updated. On the flip side, you don’t have to worry about making transactions abroad with neobanks.
An embedded integration platform leads to improved communication with customers. Firstly, it eliminates the hurdle of not transferring timely data with customers. This happens when they are not equipped with the right applications to transfer large volumes of data.
Secondly, it removes the problem of limited offering. Most businesses frequently come across issues like unsupported data formats.
Lastly, customers are impatient and a delay in serving them would only lead to lost revenue. These platforms make mundane tasks quicker, thereby retaining your customers.
Hiring Specialists From Non-Traditional Banking Backgrounds
The fintech industry places heavy emphasis on hiring the right individuals. These people aim at making boring tasks interesting by introducing features like gamification.
A big motivation for the younger generation is to pick up a career path with abundant growth opportunities.
As per the statistics, the fintech industry is tremendously growing. Another positive point is that companies equip the current staff with the necessary skills by organizing training programs. This leads to the overall development of human resources.
The Immense Growth of Fintech Startups
The rate at which Fintech startups are growing, they are likely to disrupt the banking industry.
This is the growth of Fintech startups from 2018 to 2021 (February):
With 10,605 fintech startups, America has the majority of these startups globally.
The Bottom Line
By keeping the above points in mind, we can conclude that the Fintech industry is drastically expanding. As per the predictions, the coming years will add up to the success of this industry. While it may be a threat to the traditional banking system, the convenience and security it offers are worth it.
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