The technological advancements adopted by the financial sector led to the development of a segment of more sophisticated financial infrastructure popularly known as the FinTech sector. It is one of the fastest growing and most exciting developments that globally changed the perception of financial services.
In particular, the banking and financial services industries were the early adopters of technology and are continually deploying newly developed online. Digital technologies to provide a new and better customer experience that was unthinkable a few years ago, explains Eric Dalius.
As the finance sector rapidly embraces technological advancements, it has resulted in the emergence of a new generation of FinTech within a short time that has impacted the way people do business. Customers interact with it and the way we perceive the future of finance. The lines that divide business services are now vanishing, as evident from the delivery of business services from bankers, technology providers, and advisers, which all look identical.
What drives the FinTech sector?
The advancement of FinTech thrives on many factors that have a wide-ranging impact on various aspects of the business. It ranges from technological advances to customer behavior, from lowering the barrier to entry, greater access to information, and drawing more investment in the finance sector, confirms Eric Dalius.
Technology – Technology has changed our lives because it governs almost all aspects of our daily lives by changing how we do things today. Technology spreads its wings across the internet and soars higher every day. Cloud computing, blockchain, Artificial Intelligence (AI), and IoT have played critical roles in driving financial tech companies.
Consumer behavior – The previously existing financial systems in some markets do not match the expectations of Gen X, Y, and Z, which have a greater dependence on technology. The earlier systems cannot keep pace with the societal changes, making way for better-equipped players to enter the market.
Lower barrier to entry – As technology flourished, the entry barriers have receded that compelled financial institutions to shape themselves by adapting to the change or lag behind. It has created opportunities for new challengers to throw their hats in the ring, and the new players are ready to serve customers with different behavior and needs.
More access to information – Now, companies have more access to information or data by using cloud computing technologies and tools like AI and analytics that provide more insights into trends. Based on the findings, companies can now quickly adjust to the changes.
Investments – The rapid transformation and progress of the financial sector that maintains the momentum of growth is attracting huge investments that will lead to more advancement in the future.
A new relationship with finances
As the concept of cashless transactions gain traction and is likely the most preferred mode of engaging with businesses, FinTech has influenced the way people think about money and real-time value exchange. As cashless business models are gaining wide popularity, consumers who are still reluctant about digital transactions are being forced to change their mindset and embrace it. Governments, too, are yet to decide whether to accept the progress or make it discretionary.
Going beyond the first step
Most people are now conversant with cashless transactions for online purchases of goods and services, a model well practiced by the tech giant Amazon. However, it is only the first step as Amazon is upping its game to provide a new kind of cashless transaction experience. The tech giant has embarked on a project of merging an online shopping account with a traditional shopping experience in a brick and mortar store.
To test their new concept, Amazon is focusing on nine convenience stores that do not have cashiers. After collecting what they need, customers can leave the store while the charge slip for the items automatically generates and gets charged to their Amazon account. The experiment illustrates the future of shopping.
Paying through smartphones and smartwatches
A more commonly visible Fin Tech advancement is making payments by using smartphones and smartwatches. Many consumers feel entirely comfortable with such payments. Starting from PayPal, one of the oldest players, many other players like Zeller, TranferWire, and Venmo are revolutionizing the way we deal with money without getting physical. It is now super easy to split a bill among friends or to sell some items to them.
The mode of money transaction is boosting philanthropy. Small contributors can now come forward to help someone they love or care for and who requires money by transferring money digitally to the crowdfunding account created for the purpose.
Bitcoins can be game-changers
Though less understood but more talked about, Bitcoins are the most sophisticated examples of the use of technology in the finance sector. Bitcoins are the FinTech industry’s showpieces that have presented the world with digital currencies backed by the digital bookkeeping known as blockchain. Although Bitcoins are yet to merge with our daily lives, they could eventually change how to deal with money and impact the way we manage financial risks.
FinTech paves the way for better financial services
Various technologies are impacting the way consumers interact with sellers and how they manage money. While FinTech has been the reason for introducing new ways in dealing with cash, its biggest contribution is to reach out to the areas to serve consumers where traditional financial services were of no help.
The borrowing method has become very simple due to the advent of online lending that has made borrowing/lending speedier and loans more accessible to a more extensive section of people. The footprints of FinTech are visible in the financial markets, too, as the use of AI and machine learning has resulted in automatic trading in stock exchanges. Asset management and investment advisories using advanced technology have been an important contribution of the FinTech industry.
Consumers now have more options, especially in areas where financial services were scanty that encourage them to explore new markets, which directly benefits the FinTech industry.