For years, consumers have tolerated the technological backwardness of traditional banking services. But with the rise of FinTech, they are struggling to keep up and provide customers with the innovation they need. Many people even wonder what the difference is and whether, in any case, the two should join forces to develop the financial services that consumers are looking for. Jason Simon, FinTech and eCommerce expert, explains how they differ from traditional banks.
According to data, from 2018 to 2021, the number of FinTechs almost tripled. In 2018, $ 254 billion was invested globally in around 18,000 FinTech startups via venture capital funds. First of all, it is important to know what? The FinTech industry combines financial services and technology to help individuals and businesses manage payments and financing. There is no doubt that its rise has come to change the way this sector is managed. The word FinTech is a combination of ?? finance ?? and technology. ?? Also called technofinance or techno-financial sector, the term describes an innovative technology that strives to automate and improve the implementation and distribution of financial products and services.
Simon explains that FinTech technology helps business owners, businesses and consumers easily manage their finances and business processes digitally. It is usually accessed through a computer or other devices, such as a smartphone or tablet. The industry began its development in the late 1990s when e-commerce and Internet companies emerged. In the 21st century, this technology has been integrated into the backend systems of financial institutions to digitize banking operations. Since then, FinTech has focused on consumer-oriented services. It is now used in a variety of industries including retail banking, investment management, fundraising and non-profit organizations, education, and personal financial services. Cryptocurrencies such as bitcoin are also part of FinTech development.
On the other hand, a traditional bank is a financial institution authorized to receive deposits and grant loans to individuals and businesses. Some banks also offer other financial services such as wealth management, safes and currency exchange.
There are three types of banks: merchant banks, retail banks, and investment banks. In most countries, they are regulated by a central bank or the national government. According to Simon, during the first months of COVID-19, the use of mobile banking services increased by 20 to 50%, and this trend is expected to continue after the pandemic. After conducting several studies, it was learned that consumers demand more flexible processes when it comes to digital banking. 71% prefer multi-channel interactions and 25% want a 100% digital experience with their bank, with remote human assistance available when needed.
?? To meet customer demand for speed, efficiency and user experience, financial providers need to integrate technology into their services, ?? Simon says. ?? This will allow them to deliver the agile experience that consumers expect. While retail giants like Amazon allow customers to complete a purchase in seconds, opening a new bank account shouldn’t require a face-to-face meeting.
FinTech services bridge the gap between what traditional banks offer and what the modern consumer expects. This sector is experiencing massive growth. In fact, according to The Business Research Company, the global FinTech market was valued at around $ 127.66 billion in 2018 and is expected to reach $ 309.98 billion with an annual growth of nearly 25% by 2022. FinTechs and traditional banks aim to provide comprehensive financial services to consumers. This is really the only similarity. FinTech companies are considered the biggest competitors of banks. The financial system that banks rely on today is made up of very traditional and outdated practices and procedures. It often lacks speed and agility. As consumer demands increase in this regard, they are looking for financial solutions that better meet their needs.
In terms of innovation and progress, traditional banks are lagging behind and FinTech companies are mobilizing. They may control a small part of the global banking system right now, but consumers are increasingly choosing to use them as a substitute for banks. According to Statista, between 2015 and 2019, consumer adoption of FinTech businesses and products grew rapidly around the world. In 2019, 75% of consumers worldwide started using some form of money transfer and / or payment service.
About Jason Simon
Jason Simon is a financial technology and digital payments expert who got involved in cryptocurrencies when they were introduced. He enthusiastically follows what is happening in the changing world of finance, excited about the prospects that digital currencies offer global consumerism. When not involved in advancing the digital payments space, he enjoys spending time with his family and improving his community.
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