With the implementation of new technologies and the spread of digital transformation among various industries, fintech is a natural evolution of the financial sector. Due to innovative and sometimes experimental solutions, fintech is becoming an increasingly attractive option for financial management.
Today, fintech startups are rapidly emerging in a variety of countries, driven by demand for more efficient, faster, and scalable solutions for both businesses and end consumers. Thus, most large financial organisations are looking for a fintech solutions software development company to solve their problems and meet modern needs.
In addition, traditional banking institutions are interested in implementing fintech solutions in their systems to provide better banking services. According to a study by Statista, more than 90% of banks are interested in cooperation with fintech.
All this suggests that today, we can see an increase in demand for more innovative financial technologies and products. Among the main reasons why this happens are:
- Development and implementation of new technologies and solutions
- Obsolescence of approaches and methods of traditional financial organisations
- The necessity to meet market and customer needs
- Investments in fintech solutions to increase profits
Analysing the latest trends in fintech application development the field of finance today is beginning to change extremely quickly under the pressure of innovation. So, let’s take a closer look at why traditional banking is losing its relevance and why fintech can become the future of the financial sector.
The Issues of Traditional Banking
Perhaps one of the key drivers for the growth of fintech startups are challenges that the traditional banking industry either cannot cope with or does not do so effectively enough.
Such issues of banking usually include:
High Regulations
The banking sector is the most regulated industry. Numerous requirements, standards, and compliance often result in lower process efficiency due to limitations and high costs.
This approach often results in outdated service, limited growth, and poor responsiveness of organizations to customer needs.
Operational Costs
Another problem with traditional banking is high transaction costs. The main reason is the need for organizations to have a physical location to provide their services. That is, a large bank needs to have an office in every city, as well as hire and pay salaries to employees, which implies high costs.
Lack of Technology
Many traditional financial institutions still rely on outdated banking systems. Problems that arise due to the use of such systems and technologies include low efficiency, difficulties in modernising their structure, failure of new services and products, as well as traditional banks lagging behind the needs and expectations of clients.
Customer Experience
To obtain most services and products from traditional banking, the customer is usually required to appear in person. This approach makes interaction with the financial sector often inconvenient. And if you add a lot of bureaucratic processes and queues, then you can forget about the positive customer experience, especially when compared with the services offered by fintech companies.
Data Security
Security and transparency of processes is a key priority when it comes to banking.
However, outdated systems and practices increase the risk of fraud or data breaches. If we compare traditional banking with fintech, modern financial companies that provide their services online often use the latest and more secure protocols to protect user data.
Types of Fintech Solutions
As a consequence of many challenges faced by the traditional banking system, the fintech sector is in an upward trend.
With the innovation, implementation of new technologies, and improvements in the financial industry that fintech organisations offer, it is already becoming noticeable how fintech is displacing outdated structures. This gives reason to consider fintech solutions as a natural evolution of banking.
Today, there are a number of major trends in the industry that are most in-demand among businesses and clients. These trends often include:
E-wallets
Electronic wallets are one of the main advantages of fintech compared to traditional banking.
With the development of smartphones, Internet technologies, and e-commerce, there is a demand for fast and secure online payment solutions. Here, fintech companies offer user-friendly products for clients who only need a few steps to link their bank card to the application.
In addition, e-wallets are among the most attractive options for financial institutions, making such wallets a must-have fintech solution for any modern bank.
Online payments, subscriptions, instant cash-ins and cash-outs, P2P transfers, bookings, and many other operations have become much more convenient and efficient with the advent of e-wallets.
Mobile Banking
Mobile banking is the flagship of the fintech sector. Today, smartphones are an integral part of life, so the emergence of financial products that can be used via a smartphone is natural.
Mobile financial applications allow the bank to provide its services and ensure smooth banking transactions most efficiently since all actions take place through a smartphone. This approach provides a comprehensive advantage to banks, allowing them to attract more customers in less time due to the availability and efficiency of solutions.
International Transactions
Cross-border money transfers have always been more complex transactions with higher commissions. Fintech products are an excellent alternative that can make these processes easier and faster.
In addition to improving the user experience and customer satisfaction, this approach is beneficial for both the bank and the user due to less time, resources, and money required to complete a transaction between countries.
Open Banking
Open banking is perhaps one of the key reasons why fintech is becoming the future of banking. This technology is not overly complex or sophisticated but is an effective tool.
The concept of open banking is the use of APIs that allow a user’s banking data to be shared securely and easily with third-party service providers. This approach ensures seamless and fast transactions and financial management without unnecessary bureaucracy and trips to the bank, which greatly simplifies things for both the client and financial institutions.
Check top London venture capital firms to discover how fintech is changing the modern financial sector.